Matt Levine, Columnist

Risk Committees and Bank Fines

Also Chevy Cobalts, blockchains, the TIA, colleges, non-GAAP accounting and the Enchanted Forest.

January 19, 2017 at 2:02 PM UTC

Matt Levine is a Bloomberg Opinion columnist. A former investment banker at Goldman Sachs, he was a mergers and acquisitions lawyer at Wachtell, Lipton, Rosen & Katz; a clerk for the U.S. Court of Appeals for the 3rd Circuit; and an editor of Dealbreaker.

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Deutsche Bank: The Glory Days.

At the end of 2008, Deutsche Bank AG did a trade with Banca Monte dei Paschi di Siena that magically made 367 million euros of losses disappear from the Italian bank's books. The magic was fairly simple, as magic goes: Deutsche and Monte dei Paschi entered into offsetting swaps, one of which would make a lot of money for Monte dei Paschi, and the other of which would make a lot of money for Deutsche Bank. The profitable one for Monte dei Paschi would be booked up-front, saving its balance sheet for 2008; the profitable one for Deutsche Bank would bleed into Monte dei Paschi's financial statements over time, and they'd worry about that later. "Essentially, the trade had little economic purpose—only an accounting one."