BUSTED: Bailed Out Banks HID $400 Billion In Derivatives Exposure From Regulators


Bailed out Blankfein’s $41 million Hamptons pad.

Transparency piece from the Financial Times this morning.  The $400 Bilsky figure is just for Q1 of ’09.  BIS hasn’t gotten around to the other nine months of lies.

As many as five US banks failed to report hundreds of billions of dollars in credit derivatives bought from foreign counterparties during 2009, leaving those risks below the radar of regulators in the US and Europe.

The banks’ underreported exposures to credit default swaps came to light as the US Federal Reserve and the Bank for International Settlements were preparing first-quarter reports of the industry’s lending and risk activities. It was revealed as a footnote to the BIS report’s lengthy tables.

The BIS became alarmed at the discrepancy, according to one official familiar with the report.

“This underscores how little transparency there was and how much information was missing,” said one BIS official familiar with the report.

The missing exposures came from a group of financial institutions that were hastily granted bank holding company status in 2008 as panic engulfed the world’s financial system. The rapid conversion to bank status allowed them to borrow cash from the Fed, if needed, as liquidity threatened to dry up.

The mishap underlines how the conversion also introduced those companies to a raft of complex bank reporting standards, and raises new questions on the lack of scrutiny they faced under previous regulators.

The Fed, following a review of its quarterly report on cross-border risks, discovered that the group, which included Goldman Sachs, Morgan Stanley, American Express and CIT, only submitted claims on credit derivatives up to the amount where there was a corresponding position to hedge against. The additional risks, which totalled $400bn in the first quarter, were left out.

The Daily Bail