Big Banks: "You Will Cancel FASB 166 So We Can Continue Pretending All Is Good... Or We Will Kill Lending Even More"

Tyler Durden's picture

At first it was just the smaller banks, but now the big boys have joined the collective cry against FASB 166 and 167, according to which beginning January 1, banks will likely see up to $900 billion in off-balance sheet assets being onboarded to bank balance sheets. This would likely mean banks need to dramatically increase their Tangible and Tier 1 Capital to offset the capital needed to account for possible asset deterioration. And that, of course, is unacceptable to banks who know too well the deep shit they still find themselves in.

The irony is that banks, which have already virtually halted lending to those in need of credit, are threatening they will cut any available credit even futher. How anyone could admit to being stupid enough to believe this latest episode of Mutual Assured Destruction courtesy of the US banking system is a mystery. And yet this is precisely the type of "gun against the head" negotiating that Max Keiser was fulminating against, and that the banks are once again perpetrating:

“With any increase in required capital, a banking institution is likely to reduce the amount of lending using such securitization vehicles, as well as other lending,” the American Bankers Association wrote in a letter to regulators. The association, the nation’s biggest banking lobby, suggested that any transition period should be three years at least, with no change in regulatory capital impact in the first year.

Taking a cue from the ABA, the big 3 record earners have decided to join in: last thing one would want is JPMorgan not earning yet another record amount in Q4. First Citi chimes in:

Banks should be given three years to raise capital for offsetting assets and liabilities that must be brought onto their balance sheets, Citigroup Chief Financial Officer John Gerspach said yesterday in a letter to regulators. Requiring banks to “assume the risk-based capital effects immediately, or even over one year, is an undeniably severe penalty,” he wrote.

Then you have record earner JPMorgan:

The capital requirements “will have a significant and negative impact on the amount of consumer-conduit funding that will be made available by U.S. banks,” said the letter from JPMorgan, the New York-based bank that this week reported its biggest quarterly profit since the subprime-mortgage market collapsed in 2007.

“We strongly support a phase-in period for the rule changes,” according to JPMorgan’s letter, which was signed by Managing Director Adam Gilbert. The change would take effect for annual reports after Nov. 15.

And last, Wells Fargo:

The rule “could lead to the result that every $1 billion of additional capital held from newly consolidated assets ‘crowds out’ more than $15 billion in loans,” Paul Ackerman, Wells Fargo’s treasurer, wrote in a letter yesterday to the Fed, FDIC, Office of the Comptroller of the Currency and Office of Thrift Supervision. The comment period ended yesterday.

And just so it is clear it is not just the ABA which is using the "we will stop lending" trump card, here is Citi:

Citigroup, the New York-based bank that yesterday reported a third-quarter profit of $101 million, argued that bringing off-balance vehicles onto its books would lead the bank to cut financing for securitizations that fuel credit-card lending, residential mortgages and student loans. Additional consumer loans will be cut as well, Citigroup said.

“We do not plan to reduce lending in only those businesses specifically impacted by the incremental regulatory capital requirements,” Gerspach wrote.

The FASB has proven it will do anything to enforce the Wall Street kleptocracy in its current state, and will bend any which way to make sure that assets marked-to-myth continue to fool gullible, TV watching idiots into buying bank stocks even as up to $750 billion in current assets may be mismarked from book to fair value. One can, however, be positive that even if the FASB grows a backbone, then the SEC, the FASB and the administration will promptly put any such ossification attempts on the backburner. Expect no bank to be accountable for its share in the nearly $1 trillion of off-balance sheet "assets" until the next president is elected.

h/t Deadhead

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Veteran's picture

Financial terrorists.  In Iraq we would have shot all of them

MsCreant's picture

What are we waiting for?

MsCreant's picture

Starfishes. Fight club. Down with spiders and squids.


tip e. canoe's picture

an absolutely wonderful book that is.

the answers are right in front of our face if we only took the blinders off to see, yes?

maybe it will take a fool to guide us there.

balloon boy perhaps?

Cognitive Dissonance's picture

I heard the most amazing blurb on this. The French, who replaced the Italians but were not told about the bribes, were ambushed by the locals who were unhappy the bribes were no longer forth coming. The French were furious that they weren't told about the bribes by the Italians before they replaced the Italians.

The French minister said something along the lines of "it could possibly be acceptable to pay bribes but it was insane not to tell your allies about the bribes because it rendered our threat assessment completely worthless."

The French thought they were taking over a peaceful place and didn't armor up their troops nor train the troops for the higher threat environment they didn't know they were facing.

Talking about friends screwing friends. Of course, the Americans have paid bribes for years in Iraq.

ZerOhead's picture

Ha ha ha... don't forget the millions they paid the warlords and tribal chiefs in Afghanistan to rig the "Loya Jurga" necessary to install our ex-oil executive Karzai into the "presidency".

Anonymous's picture

The same will happen here if they keep this shit up.

etrader's picture

The Usual outcome for the taxed public.

KY at the ready, bend over, touch your toes & think of England....

Its for your own good they say......

On a side note David Tice is on Bloomberg around 16:10 est

deadhead's picture

Thank you for publishing this Tyler.

I'll have more to say on this going forward and I would urge people to keep a close eye on this one as it develops.

I add that Geithner's interview on cnbc dot com with bartiromo includes his "i really mean it this time" thoughts that capital ratios must be increased to offset risk. 

I believe he has also said recently (couple of hundred times) that he "supports a strong dollar"

Does this phucking guy really believe that anybody in their right mind actually believes him and lends him any credibility whatsoever? 

Anonymous's picture

when someone says he really means it this time
he means that he doesn't mean it....he is also
announcing to the world that he is an oversized
over-vinagraitted douche bag...

the chinese students can tell you how much respect
they have for him...

he support a strong dollar like rerun supports a
strong bra....

ZerOhead's picture

He does support a strong dollar DH...

Canadian... Australian... just not US dollar.

Anonymous's picture

Seems like a normal reaction. The amount a bank can lend is dependent on how much capital it is required to hold. The real underlying issue is that most of these banks are really insolvent and should be out of business, which would stop them from lending at all.

dnarby's picture

I say we call their bluff.  They'll go BK.  We'll replace the banking system.
Trying like hell to see the downside with that...

Stuart's picture

Financial Jihadists....  I like that term.  It certainly fits.  

Hondo's picture

Take the bastards over.  No salaries and no bonus.........the majority of Americans have received no salary increases yet the idiots who brought this on are getting salary increases and a bonus to boot.  This is absolute insanity!

Assetman's picture

Oh my.  Let them not loan anymore.  I'm so scared, I'm about to fall asleep.

curbyourrisk's picture

Go ahead.....make our day...


I hope the Government calls their fucking bluff.  Let them stop lending...We can all dance on their shallow graves.  I am sure there are a few banks (or credit unions) out there that have not shot themsleves in the foot, thigh, stomach and both shoulders.  I am sure there are few banks out there with balance sheets that still allow them to lend.  Let us all reward them by giving them our business.  Please stand and be noticed.  Don't worry...Goldman is not looking....

etrader's picture

Government played its hand & when "all in" with the banks, when they feared ( paulson spin)

riots , food shortages, military coup ect...ect...

The banks will get what they want as government is even more "over a barrel" than before

this mess started....


sgt_doom's picture

"I hope the Government calls their fucking bluff."

Seriously, you are kidding, right?  They happen to own the government.  And they have placed their own people in it to ensure it stays theirs (Diana Farrell, Laura Tyson, Timothy Geithner, Larry Summers, Gary Gensler, Richard Holbrooke, Robert Hormats, Herbert Allison, Peter Orszag......

Anonymous's picture

I wish you guys would process the information correctly the only one I see that gets it sgt_doom in his post. Its not politics or political leaders . The US government has been made a branch of Goldman and the banks... not the other way around. So give up the Obama this, congress that, and get on track . Saying the government is at fault is like saying the soldier is at fault for accepting the bullet that was fired into him. Right Miles? They dont allow it to happen, they like we cant rise above the plan set forth by the ruling class. Money rules, not politicians.

Howard_Beale's picture

I think it is far deeper than that. To put things in a long term historical perspective (as in the rise and fall of any empire):

The Cycle of Nations:

From spiritual faith to great courage.

From courage to liberty.

From liberty to abundance.

From abundance to selfishness.

From selfishness to complacency.

From complacency to apathy.

From apathy to dependency.

From dependency back again into bondage.

--Sir Alex Fraser Tyler

ZerOhead's picture

Especially the bondage part...

Miles Kendig's picture

A deep well indeed.. For more than a few decades.

All The Best from Layne

Anonymous's picture

Yes, its true... THE BANKS ARE OUR GOVT!!

If our Spineless and CORRUPT elected officials will not step up to regulate the criminal banks that have extorted us for trillions, we the people, must collectively TAKE ACTION.

CHOSE NOT to do business with these big banks. Chose to put your money with one of the ethical, small lending institutions that are being thrown to the wolves by our govt. right now.

Let's put them out of business once and for ALL!!

Anonymous's picture

Would make inflation less of a problem

Stuart's picture

"Expect no bank to be accountable for its share in the nearly $1 trillion of off-balance sheet "assets" until the next president is elected."

And people wonder why our dollar is falling as creditors lose faith.   You gotta laugh at how dumb and/or blind some analysts are.  

sgt_doom's picture

"Gentlemen, we will create holding companies to hide our ownership, then years later, we will create SIVs, SPVs and SPRVs (for the insurance crooks) to hide our debt.  It is a surefire solution."

Daddy Warbucks

taraxias's picture

"Expect no bank to be accountable for its share in the nearly $1 trillion of off-balance sheet "assets" until the next president is elected."


Why, what's going to change then ?

Benthamite's picture

I was thinking the same thing - I don't think anything will.  Corporate America owns those who represent us.  By the way, still no response from my State Senator encouraging him to sign the letter to Turbo Tax Tim to end TARP.  Frustrating, at the least.


Any suggestions... anybody?


"Fascism should more appropriately be called corporatism because it is a merger of state and corporate power."





sgt_doom's picture

I was thinking that by that time, the banks would have finally consolidated into the ONE WORLD CORPORATION (which may be their ultimate goal).

Enkidu's picture

The banks are the government! Can't $22 bill in a bonus pot (Goldmanballs) qualify as 'capital'?

cougar_w's picture

Isn't this kind of stand bordering on treasonous? What if the banks of the time had come out in the weeks following the Japanese attack on Pearl Harbor and said "Looks like you guys are in a bind. Give us something we want, otherwise we're going to hold  back on financing your [war|recovery]" ?

Not that I think maintaining BAU is patriotic or something. But if you did beleive that, this stance would be shocking.

Wouldn't it?


aldousd's picture

Haha! You OBVIOUSLY haven't been paying attention. It's treasonous to suggest that Barack Obama is anything but the savior of all mankind. It's treasonous to suggest that the United States is in financial trouble. It's treasonous to suggest that Bank of America was told by our government to lie for the sake of preserving the status quo, (when in fact, they were only told by their lawyers, and we know those are bad!)  It's not at all treasonous to hold the taxpayers hostage for the sake of large banking institutions who otherwise have no means of survival.  Where is your head?

MsCreant's picture

Amen. Treason to take the red pill. Blue pills are available to all patriots in the new healthcare program.

digalert's picture

C'mon, this is bullshit! I keep thinking my TV is going to black n white and Rod Serling appears with a cigarette saying "you have entered another world, you are in the twilight zone"

small watcher's picture

"Another dimension"?

"Another World" was a soap. If that's where we're going, we really are in trouble...

Anonymous's picture

Why don't you all americans do something about this. Effin revolt already. The bankers are laughing at you each time they take money out of you wallet and put it in their pockets. You guys, collectively, are stupid, weak and pathetically ambivalent to the point where you think writing in blogs will mean anything. Grow a set of balls and take some action.

aldousd's picture

At least there aren't going to be any more bank failures. Phew.

Anonymous's picture

Why don't americans revolt on this news? The country has turned into a collection of pathetic pansies. The bankers are laughing at you every second they strip another dollar out of your wallets. Grow a set of balls and take some action.

dnarby's picture

Nooo...  It's because things haven't gotten bad enough yet.


Wait until J6P's cable gets turned off and he can't afford a 6P any more.


THEN the shit will hit the fan.

Anonymous's picture

fuck you tyler

Deficient Market's picture

Umm aren't they already borrowing more than they're lending? I.e. borrow from the fed window and keep it as reserves? So if they're already at a negative rate of lending, then threatening to cut it, means threatening to make it less negative, so I'm all for it. I say pass FASB 166 and then hold them to their promise to reduce their borrowing from the taxpayer!

OldTimer's picture

Am I wrong or is this just Japan in the 90's all over again? Perhaps a heathly outbreak of seppuku will make us all feel better


BoeingSpaceliner797's picture

This is Japan in the '90s writ LARGE by several magnitudes, at least.  Japan had an industrial/manufacturing/export base on which to fall back.  The U.S. does not.

Miles Kendig's picture

What I find noteworthy on point at this time is that: 1. 166/7 got this far at all.  2.  The money centers are not attempting to totally crush 166/7 outright, they are attempting to play for time.  These simple facts speak volumes.

I also happen to agree with Cougar and others.  We are still fighting a so called global war on terrorism in which we have our armed forces in the field suffering loss of life, limb and treasure.  Given these circumstances the banks willingness not only to fail to support their nation during a time of war, but to hold it hostage is unconscionable.  Especially when the idea of direct taxpayer funding of the disabled bankers bonus pools in excess of 50 billion US or what, 300K-70 m per banker each year over two years compared with the bonus pool of a proposed $250.00 per for the disabled veterans over the same period.

Personally, as a 100% disabled war veteran the banks with the willing assistance of my government have made it clear what I and so many have been sacrificed for.

MsCreant, did enough anger get through?

nhsadika's picture

I hear you.


Eventually, the international banker mode of operation predatory lending, default, and exercise of control were going to happen here as well.  They took down our own people this time.

Unfortunately, by spending money on so called terrorism wars (through debt) the US became that much poorer (despite our ambitions for Iraqi oil).  Then, in the face of this inflationary force we created the world's greatest spending spree (large mansions for everyone) with more cheap money.   Most people didn't have the productive capacity to buy these things, but with 0% down we fed the bubble.   Debt, default, control.


Now that we are in bubble crash mode.  Surprise who is in control - the lender - the banks.   The banks are having the taxpayer endebt itself more to push money to the lender. 

I am sorry to say, these games have been played around the world by our banks and country and now it is on our own turf.

Miles Kendig's picture

This is far from the first time this game has been played at home.