Ta Da !

American banks are posting huge profit this quarter:
Citibank: $1.6 billion [1], Goldman Sachs: $1.81 billion [2], Bank of America: $4.2 billion [3].

Does it mean the economic crisis is over? Green shoots [4] and all that?

Not really. Because apparently some magic tricks are involved.

Says Paul Krugman:
"Goldman changed its definition of “quarter” (in response to a change in its legal status), so that — I kid you not — the month of December, which happened to be a bad one for the bank, disappeared from this comparison." [5]

That's a loss of $1.5 billion, effectively erased [6].

What? You've got to be kidding.

What about Citibank? With it's debt losing value in bond market, "Citigroup was allowed to book a one-time gain approximately equivalent to that decline because, in theory, it could buy back its debt at a lower cost..." [7]

What?

Bank of America? "The bank booked a profit of $2.2 billion on the decline in value of its own debt, which is allowed because the bank could now repurchase that debt at the lower price." [8]. Isn't that pretty much the same trick as Citibank?

What?

But you said you want profit. Don't you want profit?
Yes.
So we give you profit.
Where?

Here. Ta da !

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Source:
[1] Financial Times - Results boost for Citigroup and GE
[2] BusinessWeek - Goldman: The Same as It Ever Was
[3] UPI - Economic Outlook: Underneath the profits
[4] Guardian - Federal Reserve sees green shoots but shops feel the rot
[5] New York Times - Green Shoots and Glimmers
[6] International Herald Tribune, April 22, 2009, Page 20, What's next in their bag of tricks?
[7] International Herald Tribune, April 20, 2009, Page 15, Creative accounting helps Citigroup return to profit
[8] Washington Post - Bank of America's Profit Mainly Due to Recent Deals