I can’t say that I’m suprised…. Big Banks Hide Risk – duh.

by Ryan Barr on April 9, 2010

in Economics,Investing

From the WSJ:

Major banks have masked their risk levels in the past five quarters by temporarily lowering their debt just before reporting it to the public, according to data from the Federal Reserve Bank of New York.

A group of 18 banks—which includes Goldman Sachs Group Inc., Morgan Stanley, J.P. Morgan Chase & Co., Bank of America Corp. and Citigroup Inc.—understated the debt levels used to fund securities trades by lowering them an average of 42% at the end of each of the past five quarterly periods, the data show. The banks, which publicly release debt data each quarter, then boosted the debt levels in the middle of successive quarters.

After the carnage of Lehman and Bear is anyone surprised that major banks are doing everything in their power to manage their perceived risk?  This isn’t nearly as bad was what Lehman was doing, but 42% is a major shift, in fact that would be a material shift of risk in my mind.

Call me crazy, but wouldn’t it be prudent to actually manage the risk rather than attempt to hide it?

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