{"id":472712,"date":"2010-03-25T10:31:50","date_gmt":"2010-03-25T14:31:50","guid":{"rendered":"tag:www.southernstudies.org,2010:\/\/5.12194"},"modified":"2010-03-29T09:27:02","modified_gmt":"2010-03-29T13:27:02","slug":"was-bank-of-america-in-on-lehman-style-accounting-tricks","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/472712","title":{"rendered":"Was Bank of America in on Lehman-style accounting tricks?"},"content":{"rendered":"

\"bank_of_america_vertical.jpg\"<\/a><\/span>By Marian Wang, ProPublica<\/a><\/i><\/p>\n

In a blog entry over the weekend, John
\n Hempton<\/a><\/span> (once dubbed “financial
\n blogger extraordinaire<\/a><\/span>“) explains
\n that before there was Lehman Brothers’ now-maligned maneuver called “Repo
\n 105<\/a><\/span>” … there were, well, a lot
\n of other banks also trying to do the very same thing.<\/p>\n

Such as
\nBank of America, for instance.<\/p>\n

As you may recall, Repo
\n 105<\/a><\/span> is the accounting maneuver
\nLehman Brothers used to move billions in assets off its balance sheet,
\ngiving the appearance of greater liquidity, less risk, and therefore a
\nhealthier company profile.<\/p>\n

Hempton runs us through some numbers
\nfrom Bank of America’s 2006
\n annual report<\/a><\/span>. See below:<\/p>\n\n\n\n\n\n\n
(US
\n dollars – millions)<\/td>\n		Q4 2006<\/td>\nQ3
\n 2006<\/td>\n		Q2 2006<\/td>\nQ1 2006<\/td>\n<\/tr>\n
Average
\n total assets<\/td>\n		1,495,150<\/td>\n1,497,987<\/td>\n1,456,004<\/td>\n1,416,373<\/td>\n<\/tr>\n
End period total assets<\/td>\n1,459,737<\/td>\n1,449,211<\/td>\n1,445,193<\/td>\n1,375,080<\/td>\n<\/tr>\n
end period less average
\nassets<\/td>\n		-35,413<\/td>\n-48,776<\/td>\n-10,811<\/td>\n-41,293<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

In each of these years, the bank’s assets at the end of the quarter
\nwere lower than its average assets throughout the quarter. This had been
\n happening for a while, according to Hempton. But if the bank was moving
\n its assets off its balance sheet, where was it moving them to? Hempton
\nfound the counterparty he believes was assisting Bank of
\nAmerica — Japanese bank Mitsubishi UFJ, which ended each quarter with
\nhigher assets than its average throughout the quarter.<\/p>\n

Reuters
\nblogger Felix Salmon points out that the numbers we’re talking about
\nhere are
\n big<\/a><\/span> — on par with Lehman’s Repo
\ntransgressions.<\/p>\n

I put in a call to Bank of America, and the media
\nrep there told me he needs “to talk to a number of people,” seeing as
\nthe bank will “want to be thoughtful about it.” I’ll update as more
\ninformation comes in, but given all the financial insiders talking about
\n how Repo 105 was an “old
\n trick<\/a><\/span>,”
\n this subject is one to keep watching.<\/p>\n

Update<\/strong>:<\/p>\n

Tuesday
\n afternoon, Bank of America’s media rep Scott Silvestri responded to my
\ninquiries with this statement:<\/p>\n

\n

“Efforts to manage the
\nsize of our balance sheet are routine and appropriate, and we believe
\nour actions are consistent with all applicable accounting and legal
\nrequirements.”<\/p>\n<\/blockquote>\n

My only thought is that this is very
\nsimilar to what Lehman’s auditors, Ernst & Young, said in response
\nto criticism about their review of Lehman’s accounting, right after Repo
\n 105 hit the news earlier this month. Here’s what the auditor’s
\nspokesman, Charles Perkins, said
\n at the time<\/a><\/span>:<\/p>\n

\n

“Our
\n opinion indicated that Lehman’s financial statements for that year were
\n fairly presented in accordance with Generally Accepted Accounting
\nPrinciples, and we remain of that view.”<\/p>\n<\/blockquote>\n","protected":false},"excerpt":{"rendered":"

By Marian Wang, ProPublica In a blog entry over the weekend, John Hempton (once dubbed “financial blogger extraordinaire“) explains that before there was Lehman Brothers’ now-maligned maneuver called “Repo 105” … there were, well, a lot of other banks also trying to do the very same thing. Such as Bank of America, for instance. As […]<\/p>\n","protected":false},"author":5733,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-472712","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/472712","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/users\/5733"}],"replies":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/comments?post=472712"}],"version-history":[{"count":0,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/472712\/revisions"}],"wp:attachment":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/media?parent=472712"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/categories?post=472712"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/tags?post=472712"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}