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U.S. banks reported their highest quarterly profit since mid-2007

May 24, 2012

Crisis, what crisis? Banking profits are at their highest level since 2007, while lending is falling–except for the large corporate clients.

How all this can be interpreted? Well, the economy is still in recession; small and medium companies have difficulties to borrow, while the big industrial companies get easier credit. Banks benefit from borrowing at 0% from the Fed and lending at 3 to 4%–the biggest revenue transfer of history; at the same time, banks are reducing their provisions for bad loans (it’s normal, they only lend to large companies).

Bottom line: in a context of so-called free economy, ordinary people keep paying for the restructuring of the too-big-to-fail banks’ balance sheets. The price to pay is recession and unemployment, without excluding the risk of a generalized loss of confidence to the system, if (when) it becomes clear that those tons of money injected to the banks have undermined the value of the dollar.

Keep up the good work!

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