There's a lot at stake when it comes to earnings over the next few quarters. All TARP banks are keenly aware that they will receive "credit" for earnings from regulators, who will allow them to reduce the amount of capital they are required to raise. For banks facing shortfalls, a big surge in earnings will certainly help their cause. But earnings over the last few quarters have been a bit hard to gauge. 

The AP puts it this way: "Lots of fuzzy math was trotted out during the just-ending earnings season to goose profits or narrow losses, and it will show up again as banks look to shore up their capital to meet requirements under the government's 'stress tests.' The tactics are perfectly legal, but they make the banks look healthier than they really are." One to watch is a "credit-value adjustment," which allows banks to book a gain if the value of their own debt declines. Citigroup's adjustment for the first quarter was $2.5 billion. This is one of those times when bank analysts can make a name for themselves.

For more:
- here's the AP article

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