Tuesday, April 21, 2009

Word of the day - "Banksters"

I love that word. It implies that the nations bankers are not much better than gangsters - extorting money from your grandkids to keep their house of cards erect.

The NY Times did a great job cutting through the clutter that has surrounded the many bank earnings to date. As we've seen with each report, Goldman, Wells Fargo, Citigroup, and Bank of America - there has been an accounting sleight of hand in each report.

"Another day, another attempt by a Wall Street bank to pull a bunny out of the hat, showing off an earnings report that it hopes will elicit oohs and aahs from the market. Goldman Sachs, JPMorgan Chase, Citigroup and, on Monday, Bank of America all tried to wow their audiences with what appeared to be — presto! — better-than-expected numbers.

But in each case, investors spotted the attempts at sleight of hand, and didn’t buy it for a second.

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); JPMorgan 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.

Bank of America sold its shares in China Construction Bank to book a big one-time profit, but Ken Lewis heralded the results as “a testament to the value and breadth of the franchise.”

Steven Roth, professor of management at the Tuck School of Business at
Dartmouth College, also pointed out that Bank of America booked a $2.2 billion gain by increasing the value of Merrill Lynch’s assets it acquired last quarter to prices that were higher than Merrill kept them.

“Although perfectly legal, this move is also perfectly delusional, because some day soon these assets will be written down to their fair value, and it won’t be pretty,” he said.

I can't believe that the banks don't realize that playing loose with accounting rules and creating fictitious profits were what created the financial crisis of 2008. It seems like they've learned nothing in the last 12 months other than "if we get in trouble, the graduating class of Harvard 2054 will be happy to bail us out."

Grrr. %^!#% Banksters!

Cheers!

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