Don't worry, Citigroup isn't really that profitable

The headline number from Citigroup's second-quarter earnings release—$4.3 billion—is pretty staggering. Goldman Sachs only made $3.4 billion; JP Morgan Chase $2.7 billion. And those are the well-managed banks.

Then you read to the second line of the earnings release and see that Citi booked a gain of $6.7 billion, after taxes, selling its retail brokerage, Smith Barney, to a new joint venture with Morgan Stanley. So it actually lost a couple billion dollars in the quarter. The big losses all came from what's called Citi Holdings—the junky parts of the business that Citi really doesn't want anymore and has sequestered from the main bank. "Local consumer lending," a.k.a. CitiFinancial, lost $4.2 billion for the quarter, and Citi recognized $1.3 billion in losses (on top of $44.6 billion recognized over the previous seven quarters), from its "Special Asset Pool" of bad loans backed by an FDIC loss cap.

The other, healthier, half of the business, Citicorp, reported $3 billion in pretax earnings, with most of that coming from its investment banking and corporate banking business outside the U.S. So the story line that Citi can slowly earn (and divest) its way out of the big, big mess it got itself into, and eventually pay back all that money we taxpayers gave it, remains intact, I think. It could take quite a long time, though, and I worry for the future of a corporation so technologically inept that for a while this morning almost every link on its homepage led to this: