Don't be Fooled

Banking system getting worse, not better. Zero Hedge is the best place to start with the sorry facts included is the fact that Citi, with its $3 trillion in assets, being told to find a buyer in under three weeks. What about the big profits? Ho ho that's rich. As the credit crisis has progressed, the Fed has become willing to accept more and more risky collateral, with some of the most recent incarnations of the program essentially accepting any assets, including the toxic variety. Golly gee, now it's us who own the risky assets along with the accounting legerdemain.

The brand new accounting rule enables financial institutions to defer the recognition of losses with the result that C's March trading profits swung from a $6.8B loss to a $3.8B gain. Another item worth reviewing is the decline in interest expense from $16.5B last year to $7.7B this year. Nonetheless, much more equity capital is needed. Beyond the conversion of preferred to common, watch the form of any additional capital.

Go here for details.... And always remember: The early bird gets the worm, but the second mouse gets the cheese.