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News Link • Economic Stimulus

A Bank Speculation

• arclein
This quarter's earnings were hit by a $1.1 billion accounting charge tied to the tightening of Citi's own bond spreads. This is the flip side of an asinine accounting rule that banks used to juice earnings during the credit meltdown two years ago. Back then, bankruptcy looked like a real possibility, and the value of banks' debt plunged. Assuming they could theoretically buy their own debt back on the cheap and book the difference as income, banks and their accountants went ahead and did so. Now that bank debt is increasing in value as the economy recovers, those phony profits are being reversed.

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