GreenestEgg

BofA, Lehman, AIG: The New Financial Realities

None of this is a surprise. Compare the trend of 'net income' vs. 'cash flow from operations' on any of these banks' balance sheets and you'll see that this was coming since 2006.

More cash going out than coming in is almost never a healthy way to run a mature business, especially one that doesn't need to retool factories. It all seems kind of obvious in hindsight.

American Express Calls Investment Banks' Bluff

The banks still have a way to go before bottom. Let's say I bought a $10,000 plasma TV 4 years ago and only made minimum $10 payments and now the debt is up to $22,000. My house gets foreclosed, but I keep paying the $10 minimum each month.

In the meantime, the banks have claimed the $12,000 of interest as profits (seen in accounts receivable). But I'm not going to pay that back. AND I'm not going to pay back the $10,000 for the TV. That means the $12,000 of profit must now be converted to a $22,000 loss.

The banks keep delaying doomsday by allowing $10 minimum payments and increasing credit lines to prevent default. Once CC holders start defaulting, watch out.

It's hard to tell the truth in the banks' financial statements. Ideally, you'd want to compare the accounts receivable and cash flows to historic levels in the mid/late 1990s. With all of the off-the-books special entities, we really have no idea how bad their situation is.

This is a classic case of the emperor's new clothes and cheers to Chenault for not sugar-coating what he sees.