$5 Trillion Hidden Off Bank Balance Sheets

[flashl]

Accounting changes could force US banks to take thousands of billions of dollars back on to their balance sheets in the coming months in a move that is likely to curb further their lending and could push them into new capital raisings. The absurdity is not $5 trillion coming back on bank balance sheets, but with accounting rules that let banks hold this much stuff off balance sheets in the first place.

FT

US banks fear being forced to take $5,000bn back on balance sheets

By Paul J Davies and Gillian Tett in Cannes and Jennifer,Hughes in London
Published: June 4 2008 03:00 | Last updated: June 4 2008 03:00

Accounting changes could force US banks to take thousands of billions of dollars back on to their balance sheets in the coming months in a move that is likely to curb further their lending and could push them into new capital raisings, analysts have warned.

Analysts at Citigroup said a planned tightening of the rules regarding off-balance sheet vehicles would force banks to reconsider arrangements and could result in up to $5,000bn of assets coming back on to the books.

The off-balance sheet vehicles have been used by financial institutions to keep some assets off their balance sheets, thereby avoiding the need to hold regulatory capital against them.

Birgit Specht, head of securitisation analysis at Citigroup, said: "We think it is very likely that these vehicles will come back on balance sheet.

[Selatius]

1. You can't regulate what you can't see. Put the fuckers back on the balance sheet.

It is precisely this operating-in-the-dark mentality that is not conducive to a free and open society. Unless we want the US to resemble Nazi Germany, we should not continue down this path.

[elehhhhna]

2. Enron Part 2, squared.

[phantom power]

3. Well, at least it isn't a *lot* of money...

:puke:

[SahaleArm]

4. Mark to market and many IB's would be insolvent

Level 3 = Fictitious assets.

[girl gone mad]

7. Well, they can always keep..

giving each other awards for these "brilliant" new derivatives products.

http://audio.thisamericanlife.org/player/CPRadio_player.php?podcast=http://www.thisamericanlife.org/xmlfeeds/355.xml&proxyloc=http://audio.thisamericanlife.org/player/customproxy.php

[bronxiteforever]

5. Kick & R

[DCKit]

6. But derivatives aren't even real. They're a fabricated investment vehicle of imaginary worth. n/t