There are a lot of concerns about the banks’ off balance sheet asset lately. New accounting rule will take effect starting next year and require banks to move certain off balance sheet asset back to their balance sheet. This change was triggered by the shady practice of using off balance sheet financing in the Enron case. Many analyst expect when that happens banks with large off balance sheet asset will be forced to raise capital again.
I tried to find an example of bank’s off balance sheeting financing but didn’t really find one. However I found the following was very close to an example and it is the best explanation about off balance sheet financing. “Uncovering Hidden Debt“
Wells Fargo and Bank of America were said to have huge off balance sheet asset.
- 2009-07-24 Wells Fargo’s Balancing Act
- 2009-07-21 Analyst sees $12 bln reserve charge for B. of A.
That was why I didn’t trade any financial stock lately. I don’t want to short. I don’t want to trade in and out as frequent as I did. I don’t believe in the banks’ balance sheet. All of these make me trading nothing lately. I am still waiting for the DOW to come down below 9000. I believe it will happen.
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