Citigroup’s CEO Vikram Pandit caused a surge in the Stock market today with a “memo to employees” (Translation: I’m not saying this to the SEC or directly to the public because if I’m not telling the truth, that becomes a criminal issue).
Once you read through the weasel word language (what is an “externally disclosed mark” that was excluded from the theoretical profit?), the substance comes down to – we made money because we have a $44 billion tax loss carry forward, that we will apply to future income.
This is the same thing that GM tried to do over the past few years – the reason their balance sheet fell apart was their auditors decided it is extremely unlikley GM has any chance of making a profit in the next 3 years – so those tax loss carryforwards were declared worthless and written off.
I believe today’s rally is a suckers rally. Banks don’t make wealth – they just move it around. Until Barack Obama and the Democrats drop the mantra that profit=rich=evil=corrupt, this economy is headed nowhere.
*** Update ***
CitiGroup Execs make $4.4 million profit
Just before this “announcement” of a return to profitability, Citigroup executives bought up a bunch of their own stock. This was probably completely innocent, but surely is going to invite an SEC investigation. Tim Geithner says the SEC needs to regulate more. Let’s see if he really means it – when it involves his personal friends at CitiGroup.