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Kai Ryssdal: The commission that’s investigating the financial crisis fired up the barbecue today and thoroughly grilled some former executives of Bear Stearns. The immediate topic at hand was how banks sometimes play fast and loose with the numbers on their quarterly reports. Bear Stearns did it, then had to be rescued by the Fed and JPMorgan, as you remember. And banks are still doing it.

Marketplace’s Nancy Marshall Genzer explains.

NANCY MARSHALL GENZER: It’s known as window dressing. Various accounting tricks that help banks gussy up their balance sheets for their quarterly reports.

Former Bear Stearns CEO James Cayne wasn’t anxious to discuss window dressing at today’s hearing.

JAMES CAYNE: I don’t agree with the word window dressing. Window dressing connotes skullduggery, and we frown on that.

Skullduggery or not, some big banks are still doing it. Some favor a technique Lehman Brothers perfected before it blew up. You sell your riskiest investments at the end of a quarter. That wipes them off your quarterly report. Then you quickly buy them back. Is it legal?

Douglas Elliott is a former investment banker now at the Brookings Institution.

DOUGLAS ELLIOTT: It’s sometimes a thin line between putting on makeup and putting on a disguise. You can’t always tell when that line is being crossed.

What you’re doing is hiding risky transactions from shareholders.

John Coffee teaches corporate law at Columbia University. He says banks are tempted to fudge because investors will pummel them if their quarterly reports come up short.

JOHN COFFEE: If you know the market is looking at you, then I think you are under pressure to play games.

The Securities and Exchange Commission is looking into window dressing.

Jim Coffman is a former assistant director of SEC enforcement. He says the banks need more than a public scolding.

JIM COFFMAN: Sue the banks. Sue the institutions that engage in these practices and charge them with fraud.

The SEC will have to determine whether the banks have violated any federal regulations, and whether new rules are needed.

In Washington, I’m Nancy Marshall Genzer for Marketplace.