Op-Ed: Bank CEOs Take Page from Madoff Playbook
Policymakers, CEOs inflate away losses, loot public wealth.
Editor's Note: This piece is by Rolfe Winkler, of OptionARMageddon.
We're not quite as healthy as we thought we were. The Wall Street Journal reports that "JPMorgan Chase (JPM) Chief Executive James Dimon said that March was a little tougher than the first 2 months of the year... Bank of America (BAC) CEO Kenneth Lewis also said that March had been a tougher month for his bank."
Convenient that they dumped this on Friday afternoon, at the close of a very good week.
Readers may recall that a few weeks ago, Dimon and Lewis -- along with Citigroup's (C)Vikram Pandit -- said the first 2 months of the year had been very good:
- Pandit, March 10: "We are profitable through the first 2 months of 2009 and are having our best quarter-to-date performance since the third quarter of 2007."
- Dimon, March 11: "Jamie Dimon, the chief executive of JPMorgan Chase, said Wednesday that the bank was profitable in January and February..."
- Lewis, March 12: "We have been profitable for the first two months of the year," Lewis told reporters after a speech in Boston today.
This was possibly the most nakedly self-serving bull the big-bank CEOs have offered to date.
By February, it was understood that these banks were all insolvent - certainly Citi and Bank of America. Consensus was finally tending toward a proper recapitalization, wiping out shareholders and forcing losses onto creditors via debt-for-equity swaps. Call it nationalization, call it pre-privatization, call it FDIC receivership - it was clear that losses had to be recognized, and by those to whom they properly belong: investors across the capital structure.
But no one really wanted to do this; not Congress, and certainly not the Obama administration. Tim Geithner has made it clear that his priority isn't a cleansed banking sector, it's a privately owned one. For obvious reasons, the banks don't like this solution, either. So they offered up their self-serving nonsense regarding January and February, buying just enough time for Ben Bernanke and Congress to badger FASB into changing mark-to-market rules - and for Geithner to roll out his private-public partnership plan.
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