Bank of America has joined the ranks of companies â€˜fessing up to â€œrepos.â€Â â€œReposâ€ do not mean the same thing to banks as they do to those rather large fellows with tow trucks and crow bars.Â To the latter, repos are the honest work of repossessing cars from deadbeats.Â To the former, repos are the dishonest practice of hiding debt in order to avoid being a deadbeat.Â BofA had admitted to the SEC that it used some â€œwindow dressingâ€ transactions to make its balance sheet look better at the end of the quarters in 2007-2009.Â Repos are becoming a daily event.Â The bankruptcy trustee let loose on Lehman Brothers for its â€œRepo 105â€strategy to hide $50 billion in debt.Â Helped that company out, eh?
How many times must it be said that â€œwindow dressingâ€ is notÂ a sustainable business strategy?Â How many times must we find ways to stop companies from spinning debt off the books?Â Think Andrew Fastow and SPEs and Enron.Â When this accounting prestidigitation, i.e. sleight of hand, percolates to the surface, as it always does, there are two guarantees.Â First, there is a loss of trust on the part of investors, shareholders, analysts, and regulators.Â Second, there will be litigation.Â Both bring extra tasks, strain, and costs that could be avoided by simply painting an accurate picture at each quarterâ€™s end.Â A company can survive a quarter in which it does not meet financial performance expectations. Sure, the share price takes a temporary hit, but credibility is born. Â But a company that hides the fact that it did not meet expectations, well, check out Finova, Enron, WorldCom, and the list of accounting wizardry victims marches on.Â When will we learn?