The Banking Crisis Is Over! Long Live The Banking Crisis!

Time magazine has announced an end to the banking crisis! Huzzah!

the great banking crisis of 2008 is over.
...
All of those plans, no matter how well-intentioned they may seem, are unnecessary now. Wells Fargo (WFC) indicated that it made about $3 billion in the first quarter of the year and declared its buyout of the deeply troubled Wachovia to be a success. Wells Fargo (WFC) said that the low cost of money from the government combined with a surging demand for mortgages was all the medicine that it required.

It's all True! Wells Fargo Bank announced an immense $3 Billion profit last quarter.
Shortly afterward Goldman Sachs announced a $1.8 Billion profit.

Suddenly everything is coming up roses on Wall Street.
At least if you are willing to believe total bullsh*t.

Let's start with Wells Fargo.

(Bloomberg) -- Wells Fargo & Co., the second- biggest U.S. home lender, may need $50 billion to pay back the federal government and cover loan losses as the economic slump deepens, according to KBW Inc.’s Frederick Cannon.

How could a bank that is making profits of $3 Billion a quarter need another $50 Billion? The combination of a one-time event and Enron accounting, that's how.

Net charge-offs were $3.3 billion in the quarter, compared with $2.8 billion in the previous period at Wells Fargo and $3.3 billion at Wachovia. The current numbers are artificially low because consumers received tax refunds and a there was a moratorium on some mortgage defaults, wrote Cannon, who predicts a “re-acceleration” of charge-offs in the second quarter.

“Given rising unemployment, continued home price declines and general macroeconomic headwinds, WFC’s consumer and commercial portfolios remain at risk for meaningfully higher credit losses over 2009 and 2010,” Orenbuch wrote.

OK. so WFB managed to book a huge "profit" by saying that they really weren't losing money hand over fist despite whatever reality was dictating. But how about Goldman Sachs? How did they manage to make big bucks?

Where’s December?: Goldman Sachs reported a profit of $1.8 billion in the first quarter, and plans to sell $5 billion in stock and get out of the government’s clutches, if it can.

How did it do that? One way was to hide a lot of losses in not-so-plain sight.

Goldman’s 2008 fiscal year ended Nov. 30. This year the company is switching to a calendar year. The leaves December as an orphan month, one that will be largely ignored. In Goldman’s earnings statement, and in most of the news reports, the quarter ended March 31 is compared to the quarter last year that ended in February.

The orphan month featured — surprise — lots of write-offs. The pretax loss was $1.3 billion, and the after-tax loss was $780 million.

Would the firm have had a profit if it had stuck to its old calendar, and had to include December and exclude March?

That certainly is an unusual method of accounting - dropping an entire month as if it never happened. Don't you wish you could do that with your IRS returns? The financial media ate it up, but insiders aren't buying it.

It doesn't end there.
You see, any and all Goldman Sachs profits are being directly funded by the taxpayer through AIG bailouts.

“The fact that they (like so many others) are being paid by the taxpayer through AIG’s “conduit” for losses that didn’t (yet) happen at 100 cents on the dollar might be the basic math.

And further (and potentially much worse) there is the repeated statement by Goldman executives that they were “fully hedged” against a potential counterparty default by AIG. One wonders - was that “hedge” to be short the equity on AIG itself, perhaps?

Why is this important?

Because if that’s how Goldman hedged they got paid twice and the taxpayer literally got robbed. Someone in Congress needs to look into this now; there are already rumblings of investigation. Those rumblings need to get a lot louder and turn into subpoenas, not “polite inquiries.”

Its time to send your money to Wall Street via your 401k, so you too can take part in the Great Wall Street Bank Comeback. You can't win if you don't play!
And Gawd knows Wall Street needs more of your money.

Meta: 

Comments

Well if Time magazine reports it, it must be true!

Nice call out. Let's see, now in the USSR we had media blackouts, propaganda, fiction statistics, fictional economy and ....what else?

but in the United States we have a what? Free independent press, a Democracy and what was that about fact based policy?

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The difference between USSR and USA media

In a country with dictatorship, the government can pretty much ignore what the citizens think. So, they use the media to controls citizens in a obvious way, but fortunately, people there know the fact that their Government makes up all these fictions/propaganda.

In US, on the other hand, media is controlled by interest groups who have enough power over the owners and the upper management of these media/press etc, so we are also controlled by them. However, they can't control us in a obvious way like USSR could do, because we are pushing "democracy". The folks in the governing class here know that, of course. So, they do in a different way than USSR did. Do some underwater homework (for example, finding a scandal, etc, then leak to the media), then let their media establish the "public consensus", to finally control us.

So, it is, much or less, same as USSR that you have mentioned. USSR just had more straight-forward system, while the governing class here just have to do one extra step called "making up the public consensus", before finally control people. The Actual steps are a bit more complicated, but it is basically how it works.

The worst of all, people here never doubt what media says, which is the biggest problem we have here in US, Western Europe, Japan and other countries with "democracy".

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So what you're saying is..

they used to bullshit about crop productivity numbers and we bullshit about the unemployment rate? Sounds plausible.

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doesn't hurt

to have a former Treasury Secretary sitting on the board either

It has always been about class warfare.

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of course the great banking crisis of 2008 is over!

It's 2009.
/snark

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JPMorgan Chase $2.1 Billion

ft:

Jamie Dimon on Thursday expressed JPMorgan Chase’s desire to be free from government intervention, calling the US Treasury’s toxic assets plan “irrelevant” to his bank and saying the lender could immediately repay $25bn in federal aid without raising new capital.

It appears JPMorgan Chase is also reporting amazing profits. Gee, how can that happen. The good news is that they are now reporting to return the $25 billion dollars, but what's going on here really with this sudden profits? It is funneling, mark-to-market, or simply the TARP funds themselves?

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It is partly consolidation of business.

JPM investment banking division was the earner. JPM and GS are filling a vacuum left by BofA and Citi and Merrill and Lehman and Bear Stearns. The question is whether this level of earnings is sustainable.

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well

my attitude is anything that stops this massive feed to these banks is probably good, so if they return the actual money that's positive despite whatever funky bookkeeping might be going on.

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I am kind of torn on this.

Yes, I definitely want our money back. But my concern is that TARP recipients pay it back strictly because of the "strings" attached but really can't afford it. Then they linger on just being a drag on the economy and later basically try to blackmail us for more cheap capital with no strings attached.

I think Geithner boxed us in with his strategy.

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I wouldn't worry about that

trust me, there are traders...particularly of the institutional variety who would pounce on these guys if it put their holdings in jeopardy. Secondly, the government isn't that stupid, I suspect thats one of the hidden reasons for the stress tests. If they see that giving back the money will only mean costing them more money down the road, then they'll say no on any give backs. Last, but not least, any bank that gets "sick" in this environment will simply get gobbled up, and it would be Uncle Sam that will promote such actions.

It's time to give us taxpayers back our money. I want all the 700+ billion back.

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I believe that

trust me, there are traders...particularly of the institutional variety who would pounce on these guys if it put their holdings in jeopardy

I'm to the point that I do believe that. What I no longer believe is that the holdings of *anybody* on Wall Street mirrors the interests of Joe Worker on Main Street or Jane Taxpayer- in fact, it seems over the last several years, Corporate America has been declaring war on those other two sectors of the economy.

So excuse me if while I do believe you that the traders would pounce, if it doesn't give me very much consolation.

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Executive compensation is inversely proportional to morality and ethics.

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Maximum jobs, not maximum profits.

you guys are missing the obvious ???

Why doesn't the gov't want the banks to pay back the TARP funds?

Simple .... because any of the institutions that pay back the funds automatically brings into question the health of those banks that don't payback TARP funds. Therefore ... nobody gets to pay back the funds. Its a gift courtesy of the US taxpayer.

Nice, huh?

It has always been about class warfare.

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good observation

Kind of like communism for corporations too. They ain't gonna let a single one of their pals go to the dogs, especially if they have ties to Goldman Sachs.

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Ever get the feeling we're being manipulated?

The tie ups are amazing - (JP Morgan's latest ever so clever lapdog is Tony Blair, former UK Prime Minister of course) so if you ever had the feeling of being manipulated in the past by the Fed, Big Brother Gov in cahoots with Wall Street regarding the state of the US economy... you're right on the money.

David.

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