FOR IMMEDIATE RELEASEApril 21, 2009
DON’T BELIEVE THE HYPE: CAMPAIGN FOR AMERICA’S FUTURE SAYS BANKS’ EARNINGS REPORTS UNDERLINE NEED FOR INDEPENDENT INVESTIGATION
WASHINGTON – Recent earnings reports from Citigroup, Goldman Sachs and Wells Fargo showed revenue for the first part of January, but were stark lessons in the ways accounting rules can be employed to obfuscate losses.
On Friday, Citigroup reported net income for the first quarter of 2009 of $1.6 billion, but further examination of their financial statements indicates that much if not all of their profits were due to changes to their accounting methods – not actual operational improvement.
Goldman Sachs switched its reporting periods in the process of transitioning from an investment firm to a bank. In doing so, it was able to drop the month of December, which it loaded up with large losses not captured in any of its reporting.
Wells Fargo announced a large first quarter profit two weeks before publishing an actual 2008 earnings report, leaving even its investors scratching their heads over how they added up the numbers.
These major banks are carrying toxic paper that they don’t want to mark down, for fear it would reveal just how insolvent or close to insolvent they are. They understandably will do what they can to hide the reality. In recent weeks, we’ve seen accounting standards diluted to aid them in that effort, and now we see accounting dodges to suggest they are on the way back. Meanwhile, actual lending continues to decline.
This is another reason why we need an independent panel with subpoena powers to investigate the causes and the scope of the financial collapse. And we need government to step in and demand an independent investigation of banks that are in trouble. Surely we’ve learned by now that self-reporting, like the self-regulation that got us into this mess, will not get it done.
The Congressional Oversight Panel, currently headed by Elizabeth Warren, is a step in the right direction. We support her efforts to represent consumers, small businesses and taxpayers by asking the hard questions. We applaud her efforts to make the bailout more transparent, and to evaluate the policy and its alternatives. But, shorn of the power to subpoena documents, COP illustrates exactly why a more forceful investigation is needed.