Remember how in early March the banks, starting with Citi's (C) purposefully leaked memo, announced that they had operating profits? This was the beginning of a rally of over 20% on the S&P 500, which might now be over.
Zero Hedge reports that these profits everyone thought marked a turn for the economy actually resulted from AIG unwinding its CDS positions. Basically, the government gave money to the banks through AIG, and the banks said these payments were profits.
If that's how the banks booked profits in January and February, it would seem that the current optimism will disappear. The administration, which already has credibility issues, will no doubt face another round of criticism. And maybe this time Geithner will go.
Is what Zero Hedge reports true? I don't know. I'd certainly feel more confident about the reliability of the information if it came from a more established news source. After all, I'm a guy with a blog too. I can post made up stuff and have people link to it. Especially if it sounds true, like another AIG scandal. Nevertheless, we bloggers have reputations to maintain. It wouldn't be in Mr. Durden's interest to publish what he believes to be false (though I'm sure he has that soap company of his to fall back on).
So keep in mind, maybe it's just a rumor. But I think the article is true.
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