A possible accounting fraud larger than Enron in the Too Big To Fails

[AllentownJake]

Enron was the financial scandal that kicked off the decade: a giant energy trading company that appeared to be doing brilliantly—until we finally noticed that it wasn’t. It’s largely been forgotten given the wreckage that followed, and that’s too bad: we may be repeating those mistakes, on a far larger scale.

Specifically, as the largest Wall Street banks return to profitability—in some cases, breaking records—they say everything is rosy. They’re lining up to pay back their TARP money and asking Washington to back off. But why are they doing so well? Remember that Enron got away with their illegalities so long because their financials were so complicated that not even the analysts paid to monitor the Houston-based trading giant could cogently explain how they were making so much money..

After two weeks sifting through over one thousand pages of SEC filings for the largest banks, I have the same concerns. While Washington ponders what to do, or not do, about reforming Wall Street, the nation’s biggest banks, plumped up on government capital and risk-infused trading profits, have been moving stuff around their balance sheets like a multi-billion dollar musical chairs game.

http://www.thedailybeast.com/blogs-and-stories/2009-12-01/worse-than-enron/full

As an accountant I find this absolutely fascinating...even more fascinating is the lack of external auditor or government intervention.

[clear eye]

1. The author of this article, Naomi Prins, has enormous expertise

having worked as a managing director at Goldman Sachs, and running the international analytics group at Bear Stearns in London.

I can't imagine why someone would unrecommend this, unless it was in error--a slip of the finger. I'm grateful that AllentownJake has alerted us to this situation.

[AllentownJake]

3. It was probably one of my fan club

No big deal.

It is fascinating, reading the accounting games. These are things that are taught in college and at fraud seminars. Amazing it may be taking place at such a large scale.

[truedelphi]

17. Thanks for the mini bio on Prins.

Will definitely keep my eye on her.

We need somebody that was closely involved to communicate with We the Lowly Peons...

[clear eye]

2. They could easily be paying back the TARPs and inflating their books

w/ those $Ts of "loans" from Bernanke's Fed. We pay for this every day as our income and savings become worth less and less.

This is a nightmare we just can't wake up from.

[waiting for hope]

4. With Timmeh and his ponies...

this: "even more fascinating is the lack of external auditor or government intervention" shouldn't really come as a surprise.

K&R

And a pic for the ponies...

[Lilith Velkor]

6. LOL

[AllentownJake]

14. Timmeh is a fool

Countdown to 40 cheerleaders screaming at me that he saved the world...with 17.5% unemployment.

[AdHocSolver]

5. Bank creative accounting ala Enron. The fable of the scorpion and the fox.

Briefly, the scorpion and the fox are at the edge of a river, and both want to cross to the other side. The fox can swim across, but the scorpion can't swim.

So the scorpion asks the fox if she can ride across on the fox's back. The fox is reluctant and tells the scorpion that he won't because the scorpion will sting him and he will die.

The scorpion replies that she won't sting him because if he dies in the river, then she will drown.

She convinces the fox to take her across the river, she hops on his back, and the fox starts swimming across. Half way across, the scorpion stings the fox, and as he is dying, he cries out to the scorpion, "Why did you sting me? Now we are both going to die." The scorpion responds simply, "It's my nature."

The corporations are the scorpions and the U.S. is the fox...and we are so screwed.

[Mind_your_head]

7. +1

[pansypoo53219]

8. can you say fuzzy math?

i know you are, but what am i. georgee told us he would be using it.

[Postman]

9. Hey Jake, you're an accountant?

Are you invested in the Stock Market? Would you advise to be in or out? What's your crystal ball say?

[AllentownJake]

13. I'm unemployed

So investments have been liquidated to pay for expenses.

That being said, this is a bad investing market. Many believe the market is overvalued.

If you are going to do any investing I would research the stock you are buying and look at it's fundamentals...that being said, fundamentals seem to mean nothing in the current market (it looks like a bubble fueled by cheap dollars).

[Greyhound]

10. Move along, nothing to see here. All is well, the adults are in charge now.

It will be interesting to see if there is any notice as this unfolds.
:kick: & R

[truedelphi]

11. Why is auditing needed? Obviously in our system, in which the only people who matter

Are the Wall Street types, if this doesn't pan out and they do go bottoms up, they can just hit us up again and again for more BailOut monies, right?

Except once they truly break us (after even our Social Security monies are gone) they won't be able to break us again. And then there will be the inevitable headlines reading, "Wall Street amazed that America can't bail them out" With the resultant tales of "We figured since they bailed us out before, and before, and before that, that they could do it FOREVER! We just didn't realize it weren't so!"

[JoeyT]

12. Actually, they'll probably be the last ones standing.

Even after the economy is shot totally to hell.

"You sir! I don't think you need that moldy piece of bread! It's your patriotic duty to bail me out by giving it to me. I'm too big to fail and you're just a peon, after all."

[AllentownJake]

15. When they start losing money on each other

and not by hosing the middle class....the cry for auditing will be deafening...as it always is in those situations.

[cbdo2007]

16. A lot of it really isn't even that complicated...

The govt. gave them money to invest when the market was down. The market has recovered and they're playing every single one of the ups and downs in between, even though their size is actually making most of those up and down movements happen.

[truedelphi]

18. Well said, and amazingly concise!

Thank you!