These Bank Profits Made Possible by Taxpayers Like You

This week Goldman Sachs (GS), Bank of America (BAC), Citigroup (C), and JPMorgan Chase (JPM) each announced second-quarter profits totaling $13.6 billion. Turns out much of it was based on one-time gains, says the Washington Post. Bank of America sold off investments in China Construction Bank and another firm, and Citigroup sold off its piece of the Smith Barney brokerage, each for billions of dollars. JPMorgan Chase, meanwhile, made its profits providing investment-banking services, not commercial loans.

According to bank CEOs in the Wall Street Journal, the deals were necessary in order to refocus on their core business. But they had no impact on getting lending restarted, says the AP. The Post writes, "The president's chief economic adviser, Lawrence H. Summers, said after a speech at the Petersen Institute for International Economics that the profits were made possible by ‘the extraordinary public support provided by the federal government.' "

Underscoring the need for big banks to restart lending is the saga of CIT. The ailing specialty lender needs $2 billion to $3 billion in short-term financing, according to Fortune, and is seeking loans from JPMorgan Chase and Goldman Sachs. The deal could involve a piece of the company. "The New York Post reported Friday that JPMorgan Chase could acquire CIT's factoring unit, which finances more than $50 billion of wholesale inventory, at a time of the year when the collapse of the lender could disrupt retailers' holiday plans," says Fortune. One Alabama hardware company is already blaming CIT for its bankruptcy, writes Bloomberg, which also reports that CEO Jeffrey Peek stands to earn $14.7 million, ahead of any repayment to the government of the $2.33 billion in TARP funds, should a bankruptcy or buyout occur.

Meanwhile, Porsche's once-stunning play to buy Volkswagen appears to have run out of gas. The Journal reports that, "Porsche Automobile Holding SE Chief Executive Wendelin Wiedeking, architect of the German sports car maker's failed attempt to take over Volkswagen AG, is expected to relinquish operational control of the company." Wiedeking had played the financial markets to secretly acquire almost 51 percent of shares in the much larger VW, and options for another 20 percent, by taking on a massive amount of debt. But when it came time to cover the position, he fell short of gaining access to VW's cash reserves, making a takeover untenable. Now, "under a compromise being considered, Mr. Wiedeking no longer would oversee Porsche's strategy and daily operations, but would retain his CEO title at Porsche's holding company." The matter is to be sorted out at joint board meetings of the companies later this month.

General Electric's (GE) profit fell by nearly half this quarter, thanks to the continuing struggles of its financial business, says the New York Times. The company missed Wall Street's forecast by $3 billion. NBC Universal and heavy manufacturing were down, but G.E. Capital is struggling the hardest: "The finance business was the biggest drag on G.E.'s results. Its operating profits fell 80 percent, to $590 million, down from $2.9 billion a year ago. And revenue in the finance unit, which includes home mortgages in Britain and private-label credit cards in the United States, declined 29 percent, to less than $12.8 billion, from nearly $18 billion." There's some talk by the government of forcing GE to get out of finance, but CEO Jeffrey Immelt says, "We are really committed to GE Capital."

It couldn't have been Lolita? Amazon (AMZN) got itself into a bind by remotely erasing copies of George Orwell books from Kindle devices. This follows on the heels of a class action lawsuit over cracked screens on the popular electronic book reader. 1984 and Animal Farm were the two Orwell books removed, reports the Times, after a publisher who didn't control the books' rights listed them in Amazon's e-book store anyway. "Amazon effectively acknowledged that the deletions were a bad idea. ‘We are changing our systems so that in the future we will not remove books from customers' devices in these circumstances.' " "Thoughtcrime does not entail death: thoughtcrime is death," Orwell wrote in 1984.