Bankers Can Fool All of the People Some of the Time…

The magic of creative accounting sanctioned by government and assisted by free money courtesy of the tax payer has produced record profits in the minds of the bankers.

Mix in a little less mark to market, declare as much bad debts and write-offs as you can in a bad quarterly result you could not avoid, (anyway they were all in the same boat that quarter) move the accounting quarter a month forward and inIt's time to clean out Wall Street, Treasury, and the FED the back rooms of AIG quietly share some of the TARP money around between banking mates and viola!

You can declare a profit at your bank, game your stock price and have its price rise 10 -20% then take a fortune off the table to put in your personal retirement fund just in case you can’t be as creative in the next quarter.

Or just in case your government decides its time for another CEO to face the guillotine to appease the masses.

Regardless of what you think you have to be suspicious of the profits declared by the big banks last week.

As Nouriel Roubini said in his excellent newsletter RGE Monitor (you should subscribe),

““In brief, banks are benefiting from close to zero borrowing costs and fewer competitors; they are benefiting from a massive transfer of wealth from savers to borrowers given a dozen different government bailout and subsidy programs for the financial system; they are not properly provisioning/reserving for massive future loan losses; they are not properly marking down current losses from loans in delinquency; they are using the recent mark-to-market accounting changes by FASB to inflate the value of many assets; they are using a number of accounting tricks to minimize reported losses and maximize reported earnings; the Treasury is using a stress scenario for the stress tests that is not a true stress scenario as actual data are already running worse than the worst case scenario” (no bank will fail!)

He goes on to write,

“……many of these banks were among the main recipients of AIG bailout funds in previous months, e.g. Goldman Sachs ($12.9 billion),  Get some Integrity back into the Banking System Merrill Lynch ($6.8 billion), Bank of America ($5.2 billion), Citigroup ($2.3 billion) and Wachovia ($1.5 billion), according to New York Times data.”

Off with their heads I say!

We need integrity in the bankers before we get confidence in their banks.

There is no doubt we will get out of this mess eventually. But whilst these banks and the government continue to present rubbery figures as fact serious investment cannot take place. It is only going to lengthen the period of the pain and cause more hardship over a longer timeframe for those who can least afford it.

I just found this on Seeking Alpha article, “Big Banks’ Recent Profitability Due to AIG Scam?” that helps corroborate the bleedin’ obvious that, (see the layman’s explanation further down in the article)

“For banks to proclaim their profitability in January and February is about as close to criminal hypocrisy as is possible. And again, the taxpayers fund this “one time profit”, which causes a market rally, thus allowing the banks to promptly turn around and start selling more expensive equity (soon coming to a prospectus near you), alWholesale market manipulation has gone on long enoughso funded by taxpayers’ money flows into the market.”

Note that last sentence. There goes your retirement fund a s your fund manager buys up these equities on what may be a bear market rally so they can lock in some trading profits maybe and get a bonus.

As for you – let them eat cake!

In closing the article says,

“This wholesale manipulation of markets, investors and taxpayers has gone on long enough.”

And it is all sanctioned, aided and abetted by government in the interest of fixing the economy. Doesn’t it just make you mad as hell!

“You can fool all the people some of the time, and some of the people all the time, but you cannot fool all the people all the time.”

Especially when they all have Internet access and social networking groups. This is not 1929, dummies! Information travels at the speed of light now and no one can keep a secret anymore. Governments will ignore it at their peril.

2 Responses to “Bankers Can Fool All of the People Some of the Time…”

  1. It is so true and never thought of it that way re the Internet when you compare the present situation to 1929 – good point and good article.

  2. admin says:

    Thanks for the comments on this article.

    I don’t think those in powerful position have realized the playing field is being leveled through the internet and the power of distributing information fast to millions of people.

    David

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