Re: Nothing new...wonder why the reg guy protests...midas snippet
in response to
by
Welcome To The 300 Club HUB On AGORACOM
We may not make much money, but we sure have a lot of fun!
Message: Nothing new...wonder why the reg guy protests...midas snippet
Just want people to know if you are investing in this sector.
Dave from Denver…
Tuesday, October 18, 2011
Bank of America Takes Accounting Fraud A Step Further
Bank of America's earnings report is more confusing than a Jackson Pollack painting. It certainly shows the chaos and subjectiveness reflected by Pollack's most famous works. Dave in Denver So this "fair value" technique of "guessing" provided 72% of BAC's reported net income. The DVA of course is the income BAC is permitted to record when BAC's ability to repay its debt obligations declines. Both of those accounting tricks combined created BAC's $6.2 in reported net income. So BAC's entire reported income was the product of bullshit accounting maneuvers. Bonus compensation will be paid to upper management based on bullshit. *** Dave with a late encore...
-
Bank of America reported net income of $6.2 billion this morning. As explained in my posts on JPM and Citigroup, the banks are using non-cash, non-economic accounting loopholes that allow them to basically create paper income in order to dress up their earnings reports and make them look good to the majority of investors and analysts who only look at headlines and/or only analyze the useless GAAP income, balance sheet and cash flow statements.
In brief, here's what BAC did: of the $6.2 billion in net income, $4.5 billion was derived from their "fair value adjustment of structured liabilities" and $1.7 billion from the good old debt valuation adjustment. The "fair value adjustment" is the revaluation of those nefarious Level 3 assets and liabilities that we really have no way of determining what they are worth because there are not really any observable markets in them. They are the toxic crap that sunk AIG. Here's the description from a recent BAC 10K:
Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable
and are significant to the overall fair value measurement are classified as Level 3 under the fair value hierarchy established in SFAS 157. The Level 3 financial assets and liabilities include private equity investments, consumer MSRs, ABS, highly structured, complex or long-dated derivative contracts and certain CDOs, for which there is not an active market for identical assets from which to determine fair value or where sufficient, current market information about similar assets to use as observable, corroborated data for all significant inputs into a valuation model is not available. In these cases, the fair values of these Level 3 financial assets and liabilities are determined using pricing models, discounted cash flow methodologies, a net asset value approach for certain structured securities, or similar techniques, for which the determination of fair value requires significant management judgment or estimation.
The bottom line is that using my "however" adjustments, Bank of America had zero net income. BAC also included a $3.6 billion one-time gain from the sale of China Construction Bank stock, which was used to more than offset a "mark to market" loss on its private equity portfolio. Again, the loss on the latter is completely arbitrary and subjective. If we net out the one-time gain and the private equity write-down, Bank of America actually would have reported a loss.
These accounting rules that enable the banks to report a bunch of fantasy income were put in place after 2008 with the intent to protect these too big to fail banks from the ravages of the marketplace. The people creating and enforcing these rules are the same people who have, do or will benefit from them. The people who pay for the damage these rules hide are the Taxpayers. It's getting really corrupt out there...
Tuesday, October 18, 2011
Bank of America Takes Sleaze To A New Level
If you keep your money at Bank of America, you are an idiot. BAC quietly moved $53 trillion in derivatives from its holding company to its subsidiary that holds $1 trillion in customer deposits and is insured by the FDIC. If any part of these derivatives blow up, the Taxpayer will then be on hook for the $1 trillion in deposits.
I said 8 years ago that we would eventually see things go in this country that blow your mind. This is one of them. Although this kind of move is permitted to a very limited degree by the Federal Reserve Act, there no way in hell the loophole was intended to permit $53 trillion of shit to affect FDIC-insured deposits. Of course, the watchdogs who are supposed to prevent this kind of abuse are the same people who benefit from allowing it to occur.
That the BAC upper managment would be so completely devoid of ethics and do something like this is a tragedy. That Bernanke, Geithner and Obama would allow BAC to do this is a testament to the fact that our system is collapsing.
You can read the details
1 Recommendations
Loading...
Loading...
New Message
Please
login
to post a reply