Bank Profits .. or lack thereof

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The revival may be short-lived. Analysts who have examined the quarterly profits and government tests say that accounting rule changes and rosy assumptions are making the institutions look healthier than they are.

The government probably wants to win time for the banks, keeping them alive as they struggle to earn their way out of the mess, says economist Joseph Stiglitz of Columbia University in New York. The danger is that weak banks will remain reluctant to lend, hobbling President Barack Obama’s efforts to pull the economy out of recession.

Citigroup’s $1.6 billion in first-quarter profit would vanish if accounting were more stringent, says Martin Weiss of Weiss Research Inc. in Jupiter, Florida. “The big banks’ profits were totally bogus,” says Weiss, whose 38-year-old firm rates financial companies. “The new accounting rules, the stress tests: They’re all part of a major effort to put lipstick on a pig.”

Quote is actually from Bloomberg but I saw it at balloon juice so they get the linky love too. (Yeah, like they would notice the HUGE increase in traffic via this blog)

In the interests of full disclosure I will say that I hope that Citigroup stays in business because their intercountry banking is how I pay my child support but I don't particularly like shovelling more taxpayer's money into the sinkhole that the money center banks have become. I can always use western union!