Without these convenient accounting adjustments, Bank of America would have lost money. Andrew Ross Sorkin pointed out in a recent NYT article:
“With Goldman Sachs, the disappearing month of December didn’t quite disappear (it changed its reporting calendar, effectively erasing the impact of a $1.5 billion loss that month); JP Morgan Chase reported a dazzling profit partly because the price of its bonds dropped (theoretically, they could retire them and buy them back at a cheaper price; that’s sort of like saying you’re richer because the value of your home has dropped); Citigroup pulled the same trick.”
The first quarter bank profits were faked. They were manufactured as a public relations effort to convince the country that the big banks are in fine shape. If the banks are in such good shape why has the government had to use taxpayer funds to rollout the two dozen rescue plans listed below. And now we breathlessly await the results of the stress tests.
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Source: Tyler Durden – Zero Hedge
The FSP (Financial Stability Plan for those not in the know) rolled out by Tim Geithner was supposed to save our banking system. The plan was described by Treasury as:
Increased Transparency and Disclosure: Increased transparency will
facilitate a more effective use of market discipline in financial markets. The
Treasury Department will work with bank supervisors and the Securities and
Exchange Commission and accounting standard setters in their efforts to
improve public disclosure by banks. This effort will include measures to
improve the disclosure of the exposures on bank balance sheets. In
conducting these exercises, supervisors recognize the need not to adopt an
overly conservative posture or take steps that could inappropriately constrain
lending.
