The old adage that liars figure and figures lie certainly continues to hold true. Fresh off the recent modification of the so-called Volcker Rule, which will pretty much let the big boys run amuck in the collateralized debt obligation (CDO) world, we now see the brazen efforts to convince everyone that all is well with the bankers.
JPMorgan Chase & Co has decided that if generally accepted accounting principles (GAAP) don’t quite create the numbers that will keep stock owners happy and corporate bonuses flowing, then they will create their own accounting rules called “managed basis” (non-GAAP).
Accounting gimmickry has surely been around for years, most notably in the form of two sets of accounting books. One set is used to show the tax man, while the other set keeps track of what is really occurring. The infamous Al Capone was ultimately arrested and jailed for tax evasion following the unearthing of his real set of accounting records, as even Capone, however, knew enough to hide one set. Likewise, with JPMorgan acting like JPMorgan, they boldly flaunt their arrogance by in essence making up their numbers as they go along. Meanwhile, the mainstream media, in their continuing effort to kiss Jamie Dimon’s backside, views Morgan’s type of accounting shenanigans with a wink, a nod, and a phrase of “contemporary and creative.”
In addition to JPMorgan, Bank of America and Wells Fargo continue to pad their top line revenues as well as their all-important earnings reports by aggressively decreasing their loan loss revenues. In essence, they’re removing money from one pocket only to put it into another pocket, thus creating an illusion of increasing profitability. In the case of Bank of America, over one-third of their recent so-called growth came directly from this accounting gimmick.
It would appear that all have embraced the utilization of loan loss provisions in order to satisfy Wall Street, and now it would seem that “managed basis” is the newest trick discovered by the TBTFs.
The most thought-provoking part of this entire situation is that when it comes time for the TBTFs to pay their taxes, all of them merely present their second set of accounting books and show the tax man that everything was not real; the numbers were contrived simply for the benefit of Wall Street. The TBTFs contend they’ve done nothing really illegal while also proclaiming they have no taxes to pay, either.
When Al Capone made money, he told the government that he didn’t make any money. Likewise, JPMorgan CEO Jamie Dimon informs the world that he made lots of money, but illustrates to the government that he actually didn’t.
Hmmm, who can really claim the title as all-time “Public Enemy No. 1?” I wonder!
Along with his 40-years of dedication in the financial services industry, Bill is the President and CEO of GPSforLife, has recently authored a highly successful book entitled 44th: A Presidential Conspiracy, publishes his dynamic monthly financial newsletter MacroProfit, and faithfully continues his third decade on the radio with It’s All About Money, which can be heard weekdays on Money Radio in Phoenix and in podcast form on his website (and on smartphone apps) published at billtatro.com weekdays at 5pm Eastern. Bill can be reached via email at firstname.lastname@example.org and on Twitter @tatroshow.