The Bogus Bank Recovery.(Global Investor)

Byline: Rana Foroohar

At its core, the financial crisis is about uncertainty; who's holding what, how much it's worth, when it will blow up.

If you take the headlines at face value, it has been a good month for banks. Wells Fargo announced $3 billion in first-quarter profits, Goldman Sachs racked up $1.8 billion, JPMorgan Chase had $2.1 billion, Bank of America $4.25 billion and even beleaguered Citigroup tallied $1.6 billion in profits. Treasury Secretary Tim Geithner validated the good news by declaring that the "vast majority" of the nation's banks are now well capitalized and solvent. Markets rallied. The worst of the financial crisis, it seemed, had passed.

Smart investors know better. At the core, this financial crisis has been driven by uncertainty--about who's holding what, how much it's worth and when it might blow up. A careful look at last week's profit news reveals that there's still plenty of uncertainty lurking on the balance sheets of America's top banks.

First, the most glaring examples: even as Bank of America was chalking up its profits, it was also warning that it faced growing credit losses, due to a decline in credit quality across all of its businesses (the bank's provisions for credit losses rose to $13.4 billion in the first quarter from $8.5 billion in the last quarter of 2008). "Make no doubt about it," said BOA chairman Kenneth Lewis, "credit is bad, and we believe it will get worse before it eventually stabilizes and improves."

At least he admits it. Goldman's chair Lloyd Blankfein certainly didn't go to any pains to explain that a chunk of his bank's good news came not from savvy trading, but from an accounting shift. Goldman switched from being a securities firm to a bank holding company last autumn, which changed its fiscal year, allowing it to leave much of December--a month with plenty of write-downs--largely off the books. And that's only the bad news that we can see.

As a high-level source in credit research (who didn't want to be quoted by name speaking about Goldman) pointed out to me, the bank carries around $585 billion worth of what are known as "level 2" assets--securities that may not have a clear market price but can be accounted for in the company's books by comparing them to a similar asset.