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Why are the banks claiming to have made a profit?

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posted on Apr, 17 2009 @ 08:46 PM
One more time for the cheap seats. The make to market rule change had no effect on this quarters earnings. They will however in the second quarter!

posted on Apr, 17 2009 @ 08:49 PM
reply to post by DaddyBare

Because they have been told to post only good news, this is a strategy to influence investors and their confidence in the US financial.

As we have learn after the so call various profits by the big banks that has taken tax payer money, is nothing but deceiving and the facts has been exposed over and over again.

Still they has been allow to post only good news and that is what they are doing.

posted on Apr, 17 2009 @ 09:51 PM

Originally posted by pluckynoonez
reply to post by DaddyBare

Part 1 of Elizabeth Warren on the The Daily Show

They discuss this. A bank gets 10 billion interest-free, gives back something that is worth 2/3rds of that, and then says they made 1.5 billion in the last quarter. Sounds like a scam to me.

That was a very sad video to watch...I wanted to giggle and cry at the same time. Panic sex?


posted on Apr, 17 2009 @ 10:50 PM
There are several reasons that the Banks are showing major profits while the real economy is going into the outhouse.

The major reason is AIG. In addition to paying the banks insurance for bad investments using tax payer dollars, there is another scam altogether going on.

AIG, knowing it would need to ask for much more capital from the Treasury imminently, decided to throw in the towel, and gifted major bank counter-parties with trades which were egregiously profitable to the banks, and even more egregiously money losing to the U.S. taxpayers, who had to dump more and more cash into AIG, without having the U.S. Treasury Secretary Tim Geithner disclose the real extent of this - for lack of a better word - fraudulent scam.

In simple terms, think of it as an auto dealer which knows that U.S. taxpayers will provide an infinite amount of money to fund its ongoing sales of horrendous vehicles (think Pontiac Azteks): the company decides to sell all the cars currently in contract, to lessors at far below the amortized market value, thereby generating huge profits for these lessors, as these turn around and sell the cars at a major profit, funded exclusively by U.S. taxpayers (readers should feel free to provide more gripping allegories).

What this all means is that the statements by major banks, i.e. JP Morgan Chase (JPM), Citi (C), and BofA (BAC), regarding abnormal profitability in January and February were true, however these profits were a) one-time in nature due to wholesale unwinds of AIG portfolios, b) entirely at the expense of AIG, and thus taxpayers, c) executed with Tim Geithner's (and thus the administration's) full knowledge and intent, d) were basically a transfer of money from taxpayers to banks (in yet another form) using AIG as an intermediary.

Also, remember when JP Morgan Chase and Wells Fargo got the gift of WaMu and Wachovia from the FDIC?

Imagine if you will, JP Morgan offered to buy WaMu in March 2008 for about $7 billion dollars. This purchase would have included all of WaMu's good, profitable assets (e.g. loans being paid on time by responsible borrowers, Savings Accounts with little or no interest paid, etc...) and WaMu's "toxic assets" as well.

Then, in the fall, a week or two before TARP, the FDIC seized WaMu and "sells" all of WaMu's profitable assets for $2 Billion dollars, and makes all the bad assets and liabilities disapear Kaiser Sozey style.

If you understand anything about a balence sheet, the liabilities offset the assets, losses offset gains. For example, if your business brought in $10 this year, and it cost $5 to make it, your profit was $5. To go one step further, the value of your business if you wanted to sell it is based on the above overly simplistic analysis. Therefore, if you get rid of the $5 on the loss/cost side of the balance sheet, your business becomes more valuable, not less.

So JP Morgan paid $2 Billion dollars for a business that was now actually worth more than the business they offered to by for $7 Billion dollars 4-5 months earlier.

With Wells Fargo, just see above and replace JP Morgan with Wells Fargo and WaMu with Wachovia.

This is such a huge fraud that it’s not even funny. If I didn't believe that the bankers controlled the government before, I do now.

The next quater's profit will come from the fraud in Mark to Market.

[edit on 17-4-2009 by finemanm]

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