The U.S. profits story has been a bright one for the American economy.  But it may be dimming, says Ed Yardeni:

The rebound in the NIPA measure of profits is likely to run into some headwinds. Financial firms have benefited from lots of government support and guarantees. Most importantly, in my opinion, have been the FDIC’s guarantees for bank debt and the Fed’s commitment to peg the federal funds rate near zero. These measures dramatically boosted the profitability of financial companies by widening their intermediation spreads. The Fed’s zero interest rate policy also provided them with sizable capital gains on their securities. The suspension of mark-to-market (MTM) accounting a little over a year ago was also a big profits booster. Now Washington has turned populist and seems intent on punishing the very same financial firms that were bailed out. Financial reform legislation includes several measures that could severely reduce the profitability and global competitive position of the U.S. financial industry. Oh, and FASB is back with an insane proposal to bring back MTM and apply it to bank loans.