Another Sign of Paper Profits at the Banks

Bloomberg is reporting that durable goods orders probably fell in March.

April 19 (Bloomberg) -- Orders for U.S. durable goods and home sales probably retreated in March after rebounding the previous month, showing any economic recovery will be slow to develop, economists said before reports this week.

Bookings for goods meant to last several years fell 1.5 percent, the fifth drop in six months, according to the median forecast in a Bloomberg News survey ahead of a Commerce Department report April 24. Combined sales of new and existing homes likely decreased to a 5.02 million annual rate, down from a 5.06 million pace in February, other figures may show.

It doesn't look like those bank profits from JPM and WFC aren't coming from real world investments.

On the other hand, I'm beginning to understand the operating principle here. The concept is to let the banks make paper profits by borrowing short from the Fed and lending long to the Treasury. The money is all coming out of our pockets, of course, since that's where the interest on the federal debt comes from, but it's propping up the banks and keeping them from bankruptcy.

On yet another hand, you've got the government refusing to let the banks pay back their TARP money even as the banks are begging to do so. The government wants to wield more and more power over the banks, having bought interests in them through TARP.

That might be the eventual end game here for the Democrats. If they allowed the big banks to go under, their assets would be consumed by solvent banks not under the thumb of the government. If the Obama Administration and the Democrats in congress want to continue shoving big banks around, their best choice is to prop up the existing ones they already control and keep them alive.

That's a scary thought. That means this whole rally and the preservation of the banks is just a way for the Federal government to extend its reach into the banking industry.