This paper is written to give fundamental understanding on earnings management of the banks during 2008 global financial crisis. It provides various literature reviews on earnings management of firms during a severe economic downturn, and during the period of its financial distress. Although a large number of researchers support evidence on smoothed earnings, there are some researchers suggest that big bath accounting is very beneficial during the crisis. To help firms get out of their financial difficulty, remove future earnings drag, and improve future performance, I strongly expect that big bath accounting is highly preferable for banks during the global financial crisis. Therefore, banks report large negative discretionary accruals (more loan loss provisions). Nevertheless, the ability of sophisticated investors in detecting earnings management is very high compared to unsophisticated ones, so I expect that only sophisticated investors are able to recognize the earnings components just after earnings announcement but prior to release of quarterly earnings reports.