NeWS to KnOW

According to the Wall Street Journal, major banks have been masking their risk levels the past five quarters.  They accomplished this by temporarily reducing their debt levels just before publicly releasing their debt data each quarter, only to boost their debt levels in the middle of the next quarter.

Excessive borrowing by banks was one of the major causes of the recent financial crisis.  Banks have become more sensitive about reporting high levels of debt and risk, worrying that their stocks and credit ratings may take a hit because of these levels.  This way of reporting data can give investors a skewed impression of the level of risk that banks are taking.

The SEC is investigating these practices.  More information is sure to come out of the investigation.  We are still not out of the woods...