UNBELIEVABLE WALL STREET DISHONESTY

(h/t Atrios)

We simply can't trust the Master of the Universe. They are as dishonest as 3-card-monte dealers and they have a much greater negative effect on our lives. The latest piece of insanity involves treating a downgrading of debt as INCOME! The Wall Street banks are selectively picking some of the bonds they issued and choosing the ones that are trading at a discount. For example, a $100 bond from CitiGroup may now be trading at $80. CitiGroup can now claim that it made $20 even thought it still owes the original $100.

Wall Street Says -2 + -2 = 4 as Liabilities Get New Bond Math

By Bradley Keoun

June 2 (Bloomberg) -- Leave it to Wall Street to profit from its own distress.

Merrill Lynch & Co., Citigroup Inc. and four other U.S. financial companies have used an accounting rule adopted last year to book almost $12 billion of revenue after a decline in prices of their own bonds.

Here's how it works, according to Richard Bove, an analyst at New York-based Ladenburg Thalmann & Co. A company decides to designate $100 million of its subordinated bonds as subject to mark-to-market accounting. The price of the bonds drops to 80 cents on the dollar from 100 cents. So the firm books $20 million on the ``presumed savings that you have on your liabilities,'' Bove said.

``In the real world you didn't save a dime,'' he said. ``You still owe the $100 million. It's another one of these accounting rules that basically takes you further and further away from reality.''

The Federal Reserve, Federal Deposit Insurance Corp., Office of the Comptroller of the Currency and Office of Thrift Supervision objected to the rule before its passage, saying in a joint 2006 letter to the FASB that it would ``have the contrary effect'' of increasing a bank's net worth at the same time its ``financial condition is deteriorating.''