printProfessional accountants will have a laugh at my expense, and that’s okay. But, in The Ilana Ledger, Wells Fargo owes big time, despite posting a profit for the first quarter. Take the much-touted $3 billion in first-quarter earnings the bank is expecting, and subtract it from the $25 in bailout billions it received as part of the government’s rescue scheme—and you get a financial measure of this institution. Wells Fargo is in the red to the tune of $22 billion. At least in my books.
(Unrelated: I’m off this weekend. The weekly column will return next week. I wish you all a restful, peaceful, contemplative Easter, and a good Passover.)
Ms Mercer: There you go: Being logical again — an attribute that is traditionally considered to be males’ strong suit….. But just not in our feminized society. To paraphrase Tina Turner: “What’s logic got to do with it?”
The only possible item in favor of Wells Fargo or some of the others is that, supposedly, some of the financial institutions were “pressured” by Paulson and Geithner to take the TARP “stimulus money” so as to be able to lend more to people (who currently do not wish to invest during a downturn). The mess of the last several years represents the rape of the economically responsible (and future generations) by the economically irresponsible, facilitated and led by the US Government and the FED – and with the result being a takeover of all finance by the state. A few (well connected or perhaps just smart) came out with a lot of money, the state came out with more power, and the rest of us will be paying for generations.
You are logically correct because WF enjoyed the use of the “loan” that lord Geithner refuses to allow banks to repay. WF was one that wanted to opt out of the TARP money, but lord Paulson forced them into it. WF may be financially sound (a questionable term when it comes to the banking industry) and therefore may have turned a profit even without the TARP $billions.
From the WF point of view, the TARP accounting would work like this: debit cash (on hand) and credit payables with an equal amount for the liability to repay the TARP $. This would be a net zero on the bottom line (owner’s equity).
See, here is the thing – if you give a bankster $100 of reserves, given the leverage rules he can call this as actually $1000 of assets. The problem is that fractional reserve banking muddies the waters too much for banks to be truly accountable.