U.S. Banking Crisis: American Bank Losses Continue
With TARP, the Federal Reserve discount window and FASB rule changes that allow inflated valuations of toxic assets sitting on bank balance sheets, it takes a real act of heroism for an American bank to post a quarterly loss. However, in the last quarter of 2009 two banks from the U.S. government’s list of “too big to fail” institutions earned that dubious distinction. Bank of America posted a Q4 loss of $5.2 billion, while Citigroup lost $7.6 billion.
Both banks had their own list of excuses and spin to explain the red ink, including in the case of Bank of America the paying back of its TARP funds (a decision which seemed motivated by the primary purpose of removing government restraints on executive compensation and bonuses). Nevertheless, these numbers, glaringly bad despite unprecedented taxpayer assistance and accounting rule modifications designed to manufacture profitability out of thin air, are a clear reminder than in truth, much of the U.S. banking system remains mired in deep crisis, and confronting functional insolvency.
