Daily Archives: January 4, 2013

You Don’t Say? Big Banks Systematically Hiding Potential Losses: Report

If you think the big banks learned painful lessons about risk-taking during the financial crisis, think again: They’re still taking the same risks, and we don’t even know how big those risks are.

In the latest edition of The Atlantic, Frank Partnoy and Jesse Eisinger have a 9400-word opus on the untold horrors lurking on big-bank balance sheets. The elevator summary: Boy, banks sure do a lot of dodgy trading, and they hide their potential losses from investors.

This may not come as shocking news. But it’s one of those things that we can’t hear often enough, with the momentum for reform cooling every day we get further away from the crisis. Big banks still have the capacity to blow up the financial system, and our inability to trust them makes another disaster even more likely.

Particularly useful is Partnoy and Eisinger’s deep dive into the latest annual report of a supposedly staid, conservative bank, Wells Fargo. The authors discover that the bank is not simply lending money and giving away toasters, like banks used to do. Based on the authors’ accounting, it looks like nearly $20 billion of Wells Fargo’s $81 billion in revenue in 2011 came from one kind of trading or another.

And the bank doesn’t offer much, if any, detail about the potential risks of that trading. How much money could Wells Fargo lose on its trades, which include hard-to-trade and hard-to-value derivatives? In the worst case, could the losses threaten the $148 billion in capital reserves Wells Fargo claims to have? Nobody knows, because Wells Fargo doesn’t tell us, and they’re not required to.

Read on.

Man offers his house to homeless family for a year

CBS News) For most parents, when a child leaves the nest it’s usually for good. But at age 51, Tony Tolbert has come home again. And it’s for all the right reasons — or so says his mom.

“He is so giving, and he’s always been that way,” said Marie Tolbert.

Tony grew up in a home that always seemed to have a spare bed — thanks to his father – Jimmy Tolbert.

An entertainment lawyer in Los Angeles, Tolbert’s dad extended a hand to almost anyone down on their luck. In fact, Tolbert can’t remember a time there wasn’t someone extra living in their house — and that gave the Harvard-educated attorney an idea.

He decided to take his dad’s generosity one step further.

He announced he was moving back home, because he was giving up his own fully furnished L.A. home, rent free, for a full year  — to a family he’d never even met.

Read on.

JPMorgan Faces Sanction for Refusing to Provide Madoff Documents

The Treasury Department has threatened to punish JPMorgan for failing to turn over documents to regulators investigating the bank’s ties to Bernard Madoff’s Ponzi scheme.

Source: American Banker