U.S. Banking: The End Of The Nightmare?

Seven months after the financial earthquake that shook Wall Street, after the collapse of Lehman Brothers, large U.S. banks begin to talk about profit growth and solid earnings for 2009.

Jaime Dimon, CEO of JPMorgan Chase, is proud of the performance of his bank, and says that he can now return the 25,000 million dollars that he lent from the Treasury 6 months ago.

The worst of the post-Lehman panic seems to have passed, in view of some quarterly results, better than expected, for Wells Fargo, Goldman Sachs, JPMorgan Chase and Citigroup. The strategy of “close to zero” interest rates orchestrated by the Federal Reserve seems to begin to stabilize the credit, the key step to bolster the economic upturn.

The starting signal was given by Wells Fargo on Holy Thursday. The bank, which won Wachovia in a controversial maneuver, projected a record profit of 3,000 million dollars. It is a figure similar to that recorded throughout 2008 and contrasts with a loss of 2.547 million in the fourth quarter. Its revenue in the first quarter of 2009 amounted to 20.000 million, more than half that in the full year 2008.

Euphoria is also fed by Goldman Sachs and Citigroup, who left the losses to their balance sheets stained red in the fourth quarter of 2008. “It’s the best news ever,” the analysts commented after dissecting the numbers, looking for indicators that help clarify the real state of their balance sheets. Wells Fargo justified by saying that their numbers are growing and their deposits and mortgages are rising, due to low interest rates.

But the devil lies in details. At first glance, Lloyd Blankfein (Goldman Sachs) after a loss of 2,120 million in the fourth quarter of 2008, recorded a profit of 1,800 million in the first three months of 2009….after a payment by the insurer AIG to cover losses on insurance payments.

JPMorgan Chase, the largest bank by assets, is playing in the same league. The investment banking business recorded a record profit of 1,600 million. And as Goldman Sachs, did take advantage of the massive funds being used to stabilize the credit.

But the bank faces another problem: the consumer remains under severe pressure and it is feared that the next bubble to burst is the debt of credit cards.

Citigroup also seems to see the light. Not even two months ago it was feared for its nationalization. The agency won 1,590 million in the quarter, its first profit in 18 months. In the last quarter of 2008, Citigroup caused a panic in the market, with a loss of 8290 million dollars. Now the bank seems to return to life.

When will it be our turn?

They lead the world to this financial crisis, got billions of dollars that the governement tranfered directly from citizens’pockets into the banking system, because they were “to big to be allowed to fail” and now they are proud of their performance. Come on! It would be laughable if it was not so tragic.

The massive funds injected on the market each time a bubble burst out are just preparing a bigger bubble. And the next one could well be the last one before the whole system collapses.

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