Creative accounting

A few points on the Whale trade, courtesy Jessie.
“I am making an enemy here when I say something like this, but the Fed should replace Jaime Dimon. They should replace him for utter failure of corporate governance and telling the truth too slowly.”

Janet Tavakoli

They will not get rid of him, they will continue to support him, even idolize him, because he is their partner in la vaste contrée mythique du papier, a grand, mythical kingdom made of paper.

As I said when the earnings results came out, before I even looked at the numbers in detail, JPM raided their loss reserves, along with a few other accounting tricks outlined below, to make the London Whale loss go away and achieve their forecast earnings number to the penny.

When a major event occurs and a company can hit forecast to the penny there are only so many ways to accomplish this, and most of them involve creative accounting. The same goes for companies who make the number exactly, or even more arrogantly plus one penny, quarter after quarter after quarter.

Those are ‘managed earnings.’ And that is a euphemism for the kind of accounting that belies a papier-mâché balance sheet, a scripted income statement, and troubles yet to come when the strong winds of global change start to blow again.

Full must read article here.