Friday, April 9, 2010

Schwab picks up WSJ comments on bank leverage dressin

The Wall Street Journal is reporting that 18 major banks have obscured the
level of risk and debt on their balance sheets by temporarily decreasing
debt levels immediately before reporting quarter-end results for the
last five quarters, citing data from the Federal Reserve Bank of New
York. The report highlights the use of short-term repurchase agreements,
wherein the firms use cash from the loans to purchase securities, which
are then used as collateral for other loans to buy yet more securities,
boosting the bank's leverage.

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