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Bank of America Manages Its Balance Sheet

Wed March 24 2010

Lehman was involved in repurchase agreements that allowed it to move assets off its balance sheet for the end of the quarter reporting, and then bring them back. They would want to do this as a bank has to maintain a certain ratio of equity underlying those assets, in this case a scant 3%. 

Turns out Bank of America is still doing the same thing!  And for the same reason, they own more than they should. So B of A has borrowed more money to exceed its limit on assets so it can trade these 'securities' around and claim to make money. The counterparty referred to in the article is MUFJ is Mitsubishi Bank of Tokyo. Perhaps the other side of the world is out of sight, out of mind, eh?

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3 responses to “Bank of America Manages Its Balance Sheet”

  1. Dawn Vrana Avatar
    Dawn Vrana

    OFF WITH THEIR HEADS! Have we not learned our lesson in the last decade? I am in awe of the people that find these loopholes and are responsible for this “creative” accounting. The authors of Sarbanes-Oxley, and GAAP should be hot on the trails of these thieves. These are the issues and laws that the government should be focused on. I can’t believe we, as Corporate America, and “The People” of the United States, let them get away with it either scott-free or with a slap on the wrist. I think that Corporate America and the comparable “banking” companies should throw a HUGE red flag, and question all dealings with any company that is “cooking” their books…make their cheating lives horrible, and not worth the risk! But then again…I am sure they are all responsible for a little “creative” accounting. Stuff like this makes me want to switch my major! 😦

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  2. Dennis Elam Avatar
    Dennis Elam

    Dawn
    Please stay with us in your major, we need people who get riled up about this, that is why the article was on the blog…..this will end badly , I try to provide sneak previews…

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  3. Steven Beeler Avatar
    Steven Beeler

    It’s infuriating to see firms get away with these “accounting” techniques. We put away a kid who robs $30 from a 7 Eleven for years, yet white collar criminals continue to get away with misrepresentation of their business practices, often having a largely negative impact on the hard earned money of investors. It’s simply wrong. However, until a true example is made by prosecuting these criminals and sentencing them to decades in prison, the reward of million dollar bonuses will almost always outweigh the risk.

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