why banks will/have posted record profits:

[abbott]

why banks/they will/have posted record profits:

just seems yesterday the major banks were being bailed out by the Feds. for billions, and now and probably will continue to post record profits...

to me you already know and I am waisting your time .. but here is the easy math...

Banks lend money to make $$$/interest....

befor if they lent $$$ and made a 2.5% spread that was good.........

today the get $$$ for .5% then charge 6% so a 5.5% spread = record breaking profits......

[HAL 9000]

It does seem like something has gone wrong. Banks have access to low cost wholesale funds because i) they are a lower credit risk now that their balance sheets (capital levels) have been repaired by government capital injections and ii) wholesale markets are kept liquid through quantitative easing.

But the economy still sucks and banks dont want to lend to bad credit risks, so the cost of loans remains high.

The only good news is that in many cases where i) has occurred, taxpayers are the shareholders who will reap the profits (after the bankers bonuses of course!).

Edit - look how low LIBOR is - luck for the banks! http://www.wsjprimerate.us/libor/libor_rates_history.htm

[p-branez]

Excellent simple math.

The people reaping the rewards?

On Street, Pay Vaults to Record Altitude (http://online.wsj.com/article/SB10001424052748704124504576118421859347048.html?m od=WSJ_business_whatsNews)

"When it comes to paychecks, Wall Street's law of gravity is back in full force: What goes down must come back up.

In 2010, total compensation and benefits at publicly traded Wall Street banks and securities firms hit a record of $135 billion, according to an analysis by The Wall Street Journal. The total is up 5.7% from $128 billion in combined compensation and benefits by the same companies in 2009.

The increase was fueled by a revenue rebound as the financial crisis recedes in the rearview mirror. At 25 large financial firms that have reported full-year results, revenue rose to $417 billion, another all-time high, even though last year's 1% increase was just a fraction of the industry's revenue jolt from 2008 to 2009 as trading and investment banking sprang back to life."

The financial crisis receding in the rearview mirror? Sure, for the bankers who are getting a trillion dollars of free USD dumped on them by Ben Bernanke.

And what are banks doing? Increasing their leverage, creating more debt, just as they did in the years leading up to 2008 recession.
Steve Keen, "Bank Profits a sign of economic sickness, not health (http://www.nakedcapitalism.com/2010/08/steve-keen-bank-profits-a-sign-of-economic-sickness-not-health.html)."

"The record $6 billion profit that the Commonwealth Bank is expected to announce today is a sign of an economy that has been taken over by Ponzi finance. Fundamentally, banks make money by creating debt, and the amount of debt we’ve been enticed into taking on is the sign of a sick economy rather than a healthy one. The level of private debt that is actually needed to support business and maintain home ownership at historic levels (ownership levels have fallen over recent years!) is possibly as little as one sixth the current level."