(Say Hi to Asm. Lieu. NPR's Planet Money podcast did a good report on this subject as well. - promoted by Brian Leubitz)
Two weeks ago, Bank of America surprised Wall Street by posting an alleged 'strong' profit of $4.2 billion the first quarter of this year. Now we know how they arrived at those numbers: funny math. Today we learned that Bank of America actually needs another $34 billion injection of capital in order to survive.
Bank of America is not the only firm using funny numbers. Goldman Sachs posted an alleged profit of $1.8 billion for the first quarter of 2009. The company had previously followed a calendar quarter that ran from December to February. However, Goldman Sachs conveniently and suddenly decided to change its accounting to a calendar year schedule, and changed their fiscal year to start in January, effectively eliminating December's results. The company had suffered large losses in December. So the 'profit' Goldman Sachs posted doesn't account for the entire missing month of December.
Funny numbers, lack of transparency, and the obscuring of risk were some of the prime causes of Wall Street's economic collapse, a collapse that started our recession. America's recession will be prolonged if investors continue to stay on the sidelines because they are unable to ascertain the true value of banks and other companies.
It is time for Wall Street firms to come clean and start telling Americans the truth.
