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Last night on bloomberg’s financial shows, there was a rolling clip played every so often of Bank of America’s Ken Lewis and his adjusted mathematics lesson.
And, maybe I’m not as sophisticated as those great financial geeks of Wall Street and in the corporate boardrooms of America, but even I know that you don’t use the numbers and facts from a time that was profitable to express the situation that currently isn’t.
It seems that “normalized numbers” is an expression to indicate using numbers from an earlier period (say, 2005) when the assets were performing and profits were evident to explain that a business is currently profit-making and performing well today.
And, then using those numbers from an earlier time, adding them or dividing them or otherwise manipulating them as if they happened this week, this quarter or in these last six months, to explain current profitability and to project future earnings, expectations, costs and profits.
Watching Ken Lewis in action, it is easy to see what the problem is. They think we are all stupid. And – maybe we are. We let this go on this way.
Yesterday, I created another glossary of terms, so I could keep up with them. Now, I’m going to have to add a whole other category to cover the bullshitus maximus of “adjusted mathematics” being used by Ken Lewis and other bankers, CEOs, CFOs, and public finance folks.
Glossary of specific terms, 02-25-09
Federal Reserve – access portal for free money from the government to use for covering bad bets.
stress test (for financial institutions) – figuring out how much money banks and credit card companies need and giving it to them.
legacy assets – worthless and nearly worthless toxic assets being purchased for above market rates in order to make it sound better and to make publicly traded profit-driven companies’ balance sheets look better.
stock markets – an elaborate poker game used to price things that are created in and based upon the imaginations and machinations of American financial engineers.
bond markets – a place to gamble on someone else’s bad debts – quite a thrill to get the oneupmanship of picking the one out of ten thousand that makes good on it.
financial news coverage – an entertainment akin to fantasy football based primarily on innuendo, rumor, gossip and “feel-good” reporting. Previously it was intended to do whatever it takes to make things look good in the stock market and in the corporate community such that people will stay in the “con game” of stocks, bonds, consumer credit and money market funds.
Securities and Exchange Commission – plum job with good pay and benefits provided you suit up, show up and don’t bother looking at anything in the stock market, bond markets or having to do with money or assets. A nice place to work for quick, free money, a pretty work environment and cheesecake benefits package plus perks working with old stock market and Harvard business school buddies.
Office of Thrift Supervision – something the Feds use to bully bankers with concepts about mathematics being used for other applications besides betting on the football pool or Las Vegas gambling. This includes using mathematics for accounting and adhering to other stupid regulations, (that bankers claim shouldn’t apply to them because regulators don’t understand “the necessities of business” in their opinion.)
From the lessons of watching “how its done” by bankers, investment bankers and other financial institutions – when the office of thrift supervision or other regulators of a similar authority are expected – leave town for a conference when they come by taking any file passwords with you and put all materials from them in file 86.
Explanation of a balance sheet –
> 001 – (well that’s losing money, so don’t put it on this balance sheet.)
002 – (carry forward the numbers from 2005 when it was profitable)
003 – (that really doesn’t count here because private jets are advertising)
004 – (if we put that here, it would look like we are losing money.)
005 – (that increases shareholder value, so it isn’t really paid out against anything that comes in the door. We don’t count that.)
– cricketdiane, 02-26-09