Friday, April 9, 2010

Major U.S. Banks Camouflaging Debts and Risks at End of Each Quarter

According to the Wall St. Journal, most major banks in the U.S are camouflaging their risks. They do so by temporarily reducing their level of debt at the end of each quarter, by an average of 42%. The list includes Citigroup, Goldman Sachs, Morgan Stanley, JP Morgan Chase e Bank of America and another 13 banks or so.

This can be seen on the chart below, courtesy of the NY Fed:

(please click to enlarge)

The Journal says that they "reduced their net short-term borrowings in the repo market, lowering risk profiles they release to the public, before boosting their borrowings in the middle of each successive quarter".

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