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Bloomberg has an article up (http://bit.ly/jWmOs) that's pretty interesting. The Eschaton take on it is "If we pretend everything's ok then it is."
Anyway, the headline at Bloomberg is "Bank Profits From Accounting Rules Masking Looming Loan Losses"
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.-snip-
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.”
Further deterioration of loans will eventually force banks to recognize losses that their bookkeeping lets them ignore for now, says David Sherman, an accounting professor at Northeastern University in Boston.
Zombie banks are putting the screws to even well-qualified borrowers. Credit is contracting. We have our Minsky moment at hand. In an economy that is so dependent on consumption for growth, what does this mean for labor? I don't think this ride is over quite yet.
