BofA's Bogus Bottom Line
What's the real difference between Lehman Brothers' bogus Repo 105 transactions and Bank of America's (BAC) "dollar rolls?"
Easy. Lehman Brothers isn't around anymore to offer a lame defense of its shady off-balance sheet shenanigans.
Bank of America, or Bank of America/Merrill Lynch, or whatever you want to call the TARP-made monstrosity, disclosed details of six repurchase agreements, or repos, that it incorrectly classified as sales last Friday. The so-called mistakes, which the bank acknowledged in a letter filed Friday with the Securities and Exchange Commission, effectively hid billions of dollars of debt between 2007 and 2009.The questionable transactions were called "dollar roll" trades because the bank's investing-banking unit transferred -- or rolled -- mortgage-backed securities to an unidentified trading partner and simultaneously agreed to repurchase similar securities from the partner soon afterward. The first such error occurred on March 31, 2007, and totaled $4.5 billion in securities. The largest misclassification was $10.7 billion on Sept. 30, 2008. In other words, just like the now-defunct Lehman Brothers did with its ridiculous Repo 105 deals, Bank of America would play a game of Hide the Toxic Assets at the end of every quarter to make it look more attractive to regulators and Wall Street analysts. "The transactions did not have a material impact on the bank's earnings or balance sheet," said a BofA company spokesman. Not material? Give us a break! How about the tens of billions of bailout dollars you received? Were they of any consequence in keeping BofA from going under? We thought so. Dumb-o-meter score: 75 -- Lehman died for Wall Street's sins.
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