Recall that Lehman Brothers (Lehman Brothers news) regularly used its "Repo 105" technique to make its balance sheet look better. Before it was ultimately forced into bankruptcy court, it stepped up the practice, which classified repo loans as sales to reduce debt. That practice was later exposed by an examiner.

This sort of window dressing is fairly common. A Wall Street Journal  analysis has found that three big banks--Bank of America (NYSE: BAC), Deutsche Bank (NYSE: DB) and Citigroup (NYSE: C)--are among the most active at temporarily shedding debt just before reporting their earnings. Some big firms, including Goldman Sachs Group Inc. (NYSE: GS), JPMorgan Chase & Co. (NYSE: JPM) and Morgan Stanley (NYSE: MS), haven't regularly made use of this technique.

Most banks defend the practice as good liability management. But such practices have troubled regulators. The Financial Crisis Inquiry Commission has taken a look, but it does not appear that the massive financial reform bills to be melded together address the issue. The SEC (SEC news) is taking a look, and we may end up with some guidance--or perhaps some kind of charges.

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