Happy days seem to kind of be here, again.

The banks are once again profitable and all is well, at least on the surface. But then, the surface is all that matters, because Wall Street's religion is an ideological optimism elevated to the level of a fetish.

Saturday’s Times made note of the sharp pencil used to generate Citigroup’s $1.6 billion net profit. As the paper explained:

Behind that figure was some fuzzy math. Like several other banks that reported surprisingly strong results this week, Citigroup used some creative accounting, all of it legal, to bolster its bottom line at a pivotal moment.

(The law has nothing to do with integrity. It's only concern is, "Whose ox was gored?")

What the Citigroup did was use an arcane devise known as a Credit Value Adjustment (CVA), which is defined, in part, as the difference between a risk-free portfolio and the true market value.”

The value of their bonds has tanked. This has allowed them to claim the difference between the book and market value of its bonds as an asset to reflect the savings it maybe would have realize if it were to purchase its own debt at its depressed value instead of the value at which it was initially issued, thus boosting its bottom line with this phantom asset.

For example, say Citigroup issued a bond with a book value of $25,000 and said bond now has a market value of $5,000. The bank is claiming the $20,000 difference as an asset on the assumption that it could buy back its debt at the reduced price, or something like that...

Understand, Citigroup is not the only sharp pencil on Wall Street. According to Julian Delasantellis:

[A] major factor in Goldman Sachs’ blowout first-quarter earnings of $1.8 billion was that in December the bank took massive writeoffs of bad loans amounting to about $1.3 billion, but in the process of switching from a fiscal accounting year that ends in November to one that follows the calendar year, Goldman did not report the loses in the last quarter of ’08, as it also didn’t do for the first quarter of ’09. Like a ghost ship of the accursed from Pirates of the Caribbean, apparently, the December numbers are damned to be forever lost and forsaken, a legend that the firm would much rather forget and ignore.

Yes, happy days are here, again, as Wall Street discovers that the quickest way to hide red ink is to slather it with black paint. In the Never-Never Land of Wall Street, zombie banks live and are flush with health; they jog, workout at the gym and gorge themselves on health food. The trick is not to look too closely, because if we do so, that healthy glow will turn out to be grease paint.

Wall Street reminds me of the years I spent trying to live by my wits until Idiscovered I didn't have any.

--Belacqua Jones