Bank Profits Appear Out of Thin Air

Banks report virtually phantom earnings and investors know it, and send their stocks further down.   By “phantom” I mean accounting tricks that are legal, but aren’t really “earnings” in the traditional sense of a dollar’s wage for a dollar’s work.

 

Now they are calling the Treasury “stress tests” another plan to help the banks too.  We have hated them from the word go.  They serve only to stall for time in this deflationary spiral and hopefully we’ll catch a housing bottom before they make the “results” public.  If not, they’ll probably keep postponing them.  Otherwise, the tests have no meaning.  Banks are what they are, and they lend according to their capital ratios, and no test about future phantom scenarios that will probably never exist will make them lend more or less.  

 

Even if the future phantom secenarios come to pass, banks will lend according to their capital ratios, and life will go on.  So what’s the point?  (Save the time killing.)

From the story:

“I can’t think of a single, positive thing to say about the stress test concept — the process by which it will be carried out, or outcome it will produce, no matter what the outcome is,” Thomas K. Brown, an analyst at Bankstocks.com, wrote. “Nothing good can come of this and, under certain, non-far-fetched scenarios, it might end up making the banking system’s problems worse.”

 

 

(story at right)