The revival may be short-lived. Analysts who have examined the quarterly profits and government tests say that accounting rule changes and rosy assumptions are making the institutions look healthier than they are.
The government probably wants to win time for the banks, keeping them alive as they struggle to earn their way out of the mess, says economist Joseph Stiglitz of Columbia University in New York. The danger is that weak banks will remain reluctant to lend, hobbling President Barack Obama’s efforts to pull the economy out of recession.
Citigroup’s $1.6 billion in first-quarter profit would vanish if accounting were more stringent, says Martin Weiss of Weiss Research Inc. in Jupiter, Florida. “The big banks’ profits were totally bogus,” says Weiss, whose 38-year-old firm rates financial companies. “The new accounting rules, the stress tests: They’re all part of a major effort to put lipstick on a pig.”
I don’t know what the hell this has to do with Sarah Palin, but I’m not sure I agree with the green shoots some people seem to be seeing. Personally, I’m going to stay with the skeptics like the PBS (powder blue Satan).
*** Update ***
Here is a great post at Calculated Risk comparing the current employment situation with the assumptions used during the “stress tests.” We’re doing worse, employment wise, than the assumptions in the “more adverse” scenario. But the market is up 50 points!