Wall Street Sets High Stakes for Next Fiscal Stimulus
The largest U.S. banks thrived in the second quarter as the government sent money in every direction. Huge provisions for bad loans preview the other side of the coming fiscal cliff.
Keeping some in reserve, just in case.
Photographer: Robyn Beck/AFP/Getty Images
The biggest U.S. banks are done reporting second-quarter earnings, and the message to congressional leadership is clear: Congratulations, you staved off the worst-case scenario from April through June. But now what?
Consider Bank of America Corp., where Chief Executive Officer Brian Moynihan called the past few months “the most tumultuous period since the Great Depression” in a statement on Thursday. While it’s true that profit at the second-largest bank by assets fell 52%, a look under the hood suggests the results could have been far worse. Net charge-offs were effectively unchanged from the first quarter at $1.1 billion, lower than estimates, while those for consumers declined by $138 million. The bank chalked that up to “deferrals and government stimulus.” Similarly to JPMorgan Chase & Co., a large chunk of credit-card holders who requested deferrals from Bank of America ended up making payments each month anyway.