Can't We Just Overlook a Few Things?

Such as Citi being able to record a loss on current debt as a gain due to accounting rules that allow them to claim this as an "unrealized" gain. Very convenient, along with the April 1st FASB changes that kept them from having to mark-to-market. But don't look too closely at the 10% decline in credit card revenue, an 18% decrease in consumer banking, or a 20% decrease in global wealth management revenue. Otherwise, you might think the results look pretty good.

Wells, who jump started this charade, probably bears a closer look as well. Wells got a Wachovia benefit that allowed them $7.5 billion in loan-loss provisions. They just take from the Wachovia pool without having to allocate future capital of their own until that $7.5 billion is burned through. This made their allocation of only $3 billion for future losses seem mighty small, especially with the Wachovia loan portfolio they're holding.

A few more things came to light this week that bear mentioning as well. With GGP's failure, we've witnessed the largest CRE failure in American history. Don't say I didn't warn you (recommended short 7/08 at $30). Bernanke, when questioned about variable notes this week when it was revealed local governments were caught paying double-digit interest said, "A large volume of variable-rate demand notes were forced back to banks and “exposed the vulnerabilities of the VRDN market, raising questions about the desirability of its continuation as a significant vehicle for municipal finance." Thanks, Ben, and none of this was supposed to spread to main street right?



The big matzoh ball hanging out there still is how to handle the stress-test results. While we were told yesterday that results would be released May 4, we have no idea what info will actually be released. As of yesterday, the Treasury and regulators were arguing over how much to let us sheeple know. "With a May 4 deadline approaching, there is no set plan for how much information to release, how to categorize the results or who should make the announcements, people familiar with the matter said. While the Office of the Comptroller of the Currency and other regulators want few details about the assessments to be publicized, the Treasury is pushing for broader disclosure." But I don't think that Timmy and Ben will let these results appear dire. They will paint the broadest, friendliest strokes for our largest banks and perhaps allow one or two sacrificial lambs. With the market rallying, the lies should continue at their greatest levels yet.



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