Why Are They Allowed to Talk-up Their Stock?

The last couple of days we have been hearing from the CEOs of three of largest financial conglomerates (Citigroup, Bank of America and JP Morgan Chase). All three are talking up the profitability of their companies. And of course as a result of public statements about profitability the price of their respective stocks goes up. How convenient is that? Is this stock price manipulation? What they fail to mention is the hundreds of billions of dollars in toxic stuff still on their balance sheets.

There was a time when a person could get in trouble with the Securities and Exchange Commission (SEC) for making publicly misleading statements. But these CEOs statements are probably border line legal. Besides, I am sure that the SEC has its hands full with other matters.

Don't believe the hype. It will take huge profits for an extended period of time or huge amount of taxpayer infusions to fill the huge holes in the balance sheets of these three financial conglomerates. McClatchy News did a good article about the extent of the hole in the balance sheets.

Citibank, Bank of America, HSBC Bank USA, Wells Fargo Bank and J.P. Morgan Chase reported that their "current" net loss risks from derivatives — insurance-like bets tied to a loan or other underlying asset — surged to $587 billion as of Dec. 31. Buried in end-of-the-year regulatory reports that McClatchy has reviewed, the figures reflect a jump of 49 percent in just 90 days.

What these CEOs won't say is that investing in these financial conglomerates is still extremely risky.

Gary Kopff, president of Everest Management and an expert witness in shareholder suits against banks, has scrutinized the big banks' financial reports. He noted that Citibank now lists 60 percent of its $301 billion in potential losses from its wheeling and dealing in derivatives in the highest-risk category, up from 40 percent in early 2007. Citibank is a unit of New York-based Citigroup. In Monday trading on the New York Stock Exchange, Citigroup shares closed at $1.05.

Besides, why should we believe anything that these CEOs say. They have failed in so many ways and their credibility has to be called into question. They are fighting for their survival and the truth is not on their side.

The banks' quarterly financial reports show that as of Dec. 31:

_ J.P. Morgan had potential current derivatives losses of $241.2 billion, outstripping its $144 billion in reserves, and future exposure of $299 billion.

_ Citibank had potential current losses of $140.3 billion, exceeding its $108 billion in reserves, and future losses of $161.2 billion.

_ Bank of America reported $80.4 billion in current exposure, below its $122.4 billion reserve, but $218 billion in total exposure.

I guess this is what we can expect from "dead man walking" - pure desperation.

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Comments

that's a good question

in the Sunday Morning Comics I put the Daily Show "take down" of CNBC but this has been a problem generally with cable financial news channels.

They enable these CEOs to use the media as glorified advertisements to promote their company instead of being unbiased and getting to the truth of a particular stock, company, details.

Anyone remember the 1990's when Lou Dobbs left CNN financial news channel and we had this woman who looked like a model constantly just interviewing various CEOs who used TV to pump up their own stock?

Bloomberg is always the lonely child on cable TV, it's the last of the channels to be included in a package but they do have online streaming TV news...

Maybe we should switch, are they any better?

I've got another fact, many of these executives just made out like bandits by betting their corporate stock price would increase. Of course that's a huge improvement versus getting bonuses for mergers, acquisitions or when there corporation is run into bankruptcy, nationalization and failure...

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I switched. I have not read cnn.com or watched

cnbc for over six months. Bloomberg has replaced cnbc. Bloomberg has more substance than cnbc.

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CEO Talking Up Company Stock

The machinery of government is dedicated to keeping stock valuations as high as possible. The SEC isn't going to split legal hairs with bank CEO's that can drive a 600 point DOW rally, and maybe more. It's baked in the cake.

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So now Citi is saying that don't need help.

Does that mean we don't have to buy or provide incentives to private investors to buy their toxic assets?

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