GOODFELLAS 2010

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.

March 12, 2010--WSJ--Goldman Sachs Group Inc. (GS) said that it has never used a transaction known as Repo 105. The examiner investigating the collapse of Lehman Brothers Holdings Inc. (LEHMQ) said Repo 105 used a clause in accounting rules to classify repos as sales, even though Lehman was still obliged to repurchase the assets at a later date. That meant the assets disappeared from the balance sheet, and Lehman could use the cash it received to temporarily pay down other liabilities. This made Lehman look less leveraged than it actually was.

"Goldman Sachs has never used this transaction," a spokesman for the investment bank said in an email to MarketWatch.

WB7: Want to know the difference between these guys and wiseguys? There is none.

Further reading: here and here