I was taken aback to learn that Bank of America has admitted to a $4 billion mistake in its accounting over the past several years.
Bank of America disclosed on Monday that it had made a significant error in the way it calculates a crucial measure of its financial health, suffering another blow to its effort to shake its troubled history.
The mistake, which had gone undetected for several years, led the bank to report recently that it had $4 billion more capital than it actually had. After Bank of America reported its error to the Federal Reserve, the regulator required the bank to suspend a share buyback and a planned increase in its quarterly dividend.
While regulators still believe Bank of America has sufficient capital, the disclosure of the accounting error will most likely add fuel to the debate over whether the nation’s largest banks are too big and complicated to manage.
There's more at the link.
So, let me get this straight:
- BoA employs how many bookkeepers?
- And how many accountants?
- And how many internal auditors?
- And its Board of Directors has a special 'audit committee'?
- And it hires one of the world's leading accounting firms to audit its books?
And with all that, they made this mistake years ago, and kept on making it?
I don't believe it. Sorry, but that stretches credulity too far. I think this was a deliberate misstatement of the bank's accounts, and they finally got caught at it - or realized they couldn't hide it any longer. Banksters indeed!
(YMMV, of course.)
Peter
10 comments:
Yep, they got caught... My opinion...
The banks routinely break the law and pay only when they get caught. I think that they have discovered that they make more money that way.
As long as the extra money they make is more than the penalties they pay when they occasionally get caught, it is a winning proposition.
For example, Bank of America admitted to committing fraud, and I posted about it on my blog:
http://street-pharmacy.blogspot.com/2010/10/bank-of-america-admits-fraud-just-not.html
But is was under reporting. Having more capital on hand than expected is a good thing.
Not that it should happen what with all those checks and balances.
Fed's are unhappy because they did not spot it.
No, Paul, it had $4bn. less capital than expected.
Well, then lets get the torches :-)
It would be telling to discover which of BofA's leadership received how much as a result of that over-reported figure "several years ago". Others could be, and no doubt were, recruited to the subsequent to "protect the bank" by continuing the over-reporting, but I strongly doubt any of those ever received as much as a penny in additional bonus from the inflated book figure.
"... subsequent effort ..."
Completely useless editor I employ.
Peter.. you're right... more than you know... and the really interesting part is how and why... and why the "penalty" is so light....
And why no-one in banking or brokerage is freaking out about this.
And why it goes back to the 2009 acquisition of Merril Lynch.
And why the 3 year limit and the reserve capital requirements were/are being bent....
...and I can't say anything else because I have proprietary information and while it's not likely... I could be sued.
One more note, that might help to understand what's REALLY happening here...
They didn't "get caught"... They agreed to disclose at this time...
There's a very significant difference in that.
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