It is time to ask a Mark Twain question: Were the reports of the death of Wall Street banks exaggerated?
Analysts were in for a pleasant surprise on Thursday when investment bank JPMorgan announced better-than-expected results for the first quarter of 2009. This came close on the heels of Tuesday’s profit statement by Goldman Sachs that trumped analyst expectations and the plans by the financier to raise money through a fresh sale of equity.
How much should we read into these two bits of news? Not too much.
First, there is the fact that JPMorgan is still making losses and Goldman Sachs benefited because it changed its accounting year, allowing it to skip a bad December from its quarterly statement. Second, large parts of Wall Street are still in a mess that is unlikely to be cleared soon.
But most important of all, there is little doubt that the bloated US financial sector has to shrink and the business models of its stars have to be junked. Add to that populist anger. Wall Street is not out of the woods as yet.