Window Dressing Turns Toxic on Wall Street: Lisa Abramowicz

Big banks always like to tidy up their balance sheets ahead of their quarterly earnings reports, the Wall Street equivalent of putting on makeup before a big date. But the latest go-round was more than a vanity exercise for the debt market, and more ominous, it could turn garish at the end of the year.

The banks were especially aggressive about primping and pruning at the end of September. Dealers sold a net $5.6 billion in just one week, leaving them with the smallest pool of corporate-debt holdings on their books in recent history. The 22 primary dealers that trade with the Federal Reserve reported just $13.1 billion of the debt at the end of last month, 71 percent below the amount in March 2014, according to Fed data compiled by Scott Buchta at Brean Capital LLC.