As expected, Goldman Sachs is announcing a huge beat in earnings and a capital raise. Expect to see the same sort of announcements out of the other financials. I still firmly believe the banks are taking advantage of fishy accounting and the AIG trading desk to help drive earnings higher. All of this is an attempt to fool private investors into providing capital because the government is concerned the PPIP and TALF plans will fail to achieve their goals of shoring up bank balance sheets.
Of course, readers of TPC knew this was coming early last week (more here). The fact that so few investors have caught on to this effective scam is remarkable. To the government’s credit, I must admit – this is a very clever litte scheme to try to raise capital from the public. It goes like this: change the accounting rules, funnel funds to the banks via AIG boosting Q1 earnings, announce the PPIP, announce the stress tests, leak the results and the fact that all banks will pass and then let the earnings do the talking. Then hit the market with billions in capital raises so that the banks can raise capital from the public (something they are now concerned about being able to do through their various taxpayer programs and let’s not forget that the possibility of raising more money from Congress is entirely out of the question now that taxpayers are fully onto the scams that are occurring at their expense). Tim Geithner is a clever man, but it’s only a matter of time before the tide goes out and the banks are again exposed as being undercapitalized government run ponzi schemes.