24/7 Wall St.

The Financial Times reports that former staff members from Deutsche Bank A.G. (NYSE: DB) say the company hid $12 billion in financial losses during the credit crisis to avoid a bailout. The idea that this amount could be hidden from accountants and the hundreds of senior managers at the largest bank in Europe seems impossible because the sum is so staggering. Perhaps the people making the accusations made them up. According to the FT article:

The three complaints, made to regulators including the US Securities and Exchange Commission, claim that Deutsche misvalued a giant position in derivatives structures known as leveraged super senior trades, according to people familiar with the complaints.

All three allege that if Deutsche had accounted properly for its positions — worth $130 billion on a notional level — its capital would have fallen to dangerous levels during the financial crisis and it might have required a government bailout to survive.

On the small chance this is true, some major audit firms are in trouble.

Douglas A. McIntyre