Your Banks, Fudging The Numbers

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Some advice* for you the next time you need a loan: Before you go to the bank, move about 42 percent of your existing debts “off balance sheet,” so you don’t have to report them. That pesky credit card bill you will never be able to pay off–hide it. Those car payments you probably won’t be able to make–make ’em disappear, if only for a few days.

Even if your banker eventually finds out that you fooled him, you won’t have to sweat it. After all, banks make it a policy to hide their debt from the public, as the Wall Street Journal explains today in a story that you should not miss. To wit:

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.

* I am joking. Do not take this advice. It is illegal for you to lie to your bank. But of course, it is perfectly legal for the bank to misrepresent its own level of risk before making public reports. Why the disparity? When you run the casino, you play by different rules. And the bonuses are really good.