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Edited on Thu Apr-16-09 01:22 PM by CoffeeCat
Last week, Wells Fargo announced a $3 billion profit in Q1. Their stock soared and the banking sector soared as WF pulled it along. Hell, the entire DOW went up more than 300 points the day of the WF announcement that created an optimism tidal wave.
Now...we find out that there are qualifiers behind those numbers and that the scenario may not be as rosy as we were initially led to believe. Wells hasn't released the HOW of arriving at that $3 billion figure, but many are speculating that WF didn't have to write down foreclosures, due to Obama's moratorium. There's also some creative accounting and write downs going on--as well as WF's Wachovia acquisition muddying the waters.
So.....that's one silver lining that may be tarnished.
Another example is Bank of America's impressive profitable January that wowed the market. Once again the market reacted, but now we find out these impressive numbers were due to some finagling, also AIG's situation affected BofA's numbers. So, another tarnished silver lining, when we were led to believe that things were improving.
So now, when i hear that Citi is announcing these "record profits"--pardon me if I'm not skipping in the streets. Is this another example of creative accounting gone awry?
Also, the banking industry lobbied very hard to get Federal accounting standards changed. They succeeded and those standard were changed TWO WEEKS AGO. As a result, THE BANKS determine what their toxic assets are worth--not market value. Could this possibly be impacting their earnings numbers and creating better numbers?
Another point. Lending has been nearly frozen for the better part of Q1. On the demand side--businesses and consumers aren't out borrowing. They're hunkering down and hurting due to the economy. How in the world could a bank have "record profits" at a time like this? I'm asking...because I'm not a finance expert...
I'm just trying to understand this cluster$$#, and navigate the lies, half-truths and press releases.
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