By BJ Bjornson
While the markets have apparently decided that all is well with Wall Street, more than a few of us are of the considered opinion that very little has changed and are waiting for the other shoe to drop on the vapourous wealth the investment banks have been continually recycling as though it were of real value. Which leads me to this article by Nomi Prins:
Enron was the financial scandal that kicked off the decade: a giant energy trading company that appeared to be doing brilliantly�until we finally noticed that it wasn�t. It�s largely been forgotten given the wreckage that followed, and that�s too bad: we may be repeating those mistakes, on a far larger scale.
Specifically, as the largest Wall Street banks return to profitability�in some cases, breaking records�they say everything is rosy. They�re lining up to pay back their TARP money and asking Washington to back off. But why are they doing so well? Remember that Enron got away with their illegalities so long because their financials were so complicated that not even the analysts paid to monitor the Houston-based trading giant could cogently explain how they were making so much money.
After two weeks sifting through over one thousand pages of SEC filings for the largest banks, I have the same concerns. While Washington ponders what to do, or not do, about reforming Wall Street, the nation�s biggest banks, plumped up on government capital and risk-infused trading profits, have been moving stuff around their balance sheets like a multi-billion dollar musical chairs game.
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Trading profitability, albeit inconsistent and volatile, is the quickest way back to the illusion of financial health, as these banks continue to take hits from their consumer-oriented businesses. But, appearance doesn�t equal stability, or necessarily, reality
I recommend reading the whole thing, but make sure you�re sitting down first.
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