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FASB Proposes Semi-MTM Requirement, American Banker Association Goes All "Mutual Assured Destruction"
Ever since the financial crisis made it all too clear that all US banks would be insolvent if their assets were marked anywhere near fair market value, Bank Holding companies received a green card to actually represent any of their securities "held to maturity" at anything else than mark-to-model/myth/unicorn on their books. Obviously models miraculously priced all barely cash producing loans at par, and with "out of sight, out of mind" receiving the full blessing of the administration's treatment vis-a-vis an insolvent banking system (i.e., no risk, all return), investors realized they have nothing to fear as pertains to the asset side of bank balance sheets, they ended up purchasing such otherwise undercapitalized companies as Citigroup (and soon, incidentally, Government Motors, which as Jonathan Weil reported recently, would have an equity value of negative $6 billion if the bankrupt company's $30 billion in goodwill assets was removed). Well, the FASB has just fired a semi-warning salvo at the banking system with a new proposed rule that would seek the gradual return of that long lost concept known as mark-to-market.
However, while not going all the way and demanding that everything on the balance sheet flowed through the income statement's bottom line, the FASB has decided to give banks the leeway of accounting for MTM adjustment in the bottom bottom line, which few if any ever look at (and certainly not sellside bank analysts): the Other Comprehensive Income line. Yet since this would at least optically disclose just how bankrupt most US lenders are, the ABA has gone nuts on the FASB and has decided to pull its one Mutual Assured Destruction wildcard: lending, claiming: "the proposal would greatly undermine the availability of credit by
making it difficult to make many long-term loans, the value of which,
even if performing perfectly, would likely be reduced on the day a loan
is made." The fact that it would also show just how broke the state of US finance truly is, seems to have been omitted from the ABA's complaint.
More from Mark-To-Market Debate:
The Financial Accounting Standards Board has proposed new rules under which banks and other lenders would be required to use mark-to-market accounting.
Banks would have to report both the fair value and amortized cost of loans and some other financial assets and liabilities on their balance sheets under the new rules. Changes in fair value would, in most cases, be recognized in other comprehensive income and could cause swings of billions of dollars in the book values for the biggest lenders.
Sure enough, one look at the bolded text is all it took for the ABA to go all up in arms over the proposal which all but screams that the "emperor is naked."
The American Bankers Association released a statement that said the accounting change would present “significant problems, not only for banks, but also the general economy. If implemented, the proposal would greatly undermine the availability of credit by making it difficult to make many long-term loans, the value of which, even if performing perfectly, would likely be reduced on the day a loan is made.”
Ah, good old MAD - don't touch the status quo, or else. In the meantime please continue the borken Keynesian scheme of funding is in perpetuity, while we cover up just how broke we are, all the while receiving tens of billions in bonuses for dragging the American financial system into the ground.
To be sure, even with the full implementation, banks would still have at least 3 years to collect full bonus payments:
The rules would take effect for the biggest banks as early as 2013. Smaller banks, with less than $1 billion in assets, would be permitted to wait until 2017. The FASB is seeking comment through September 30, 2010.
We disagree with MTMReport's conclusion:
This is restrictive and gets it half right. Report the fair value, disclose it and keep it current. But don’t hit the lenders in the O.C.I. This will discourage lending. Period.
It doesn't matter if the MTM impairment is run through the income statement at all: investors can do their own math. We all know banks earnings are a scam, however if at least the fair value of trillions in "assets" was disclosed we could all do the simple subtraction (note: not addition) from book value to determine just how many billions the book (and this market) equity is underwater by. The bottom line is that unless the ABA once again manages to outbluff the accounting system, which is nothing but a token facade for legitimacy and representation, the double dip for banks is about to join the double dip in housing, which CNBC already reported on earlier.
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Mark-to market (if it ever came true): the greatest wet dream for the majority of ZH readers.
And a victory for those that really want to buy a home at it's true value..
Which is exactly why it ain't happening. By gradual they were thinking when? Around the time James T.Kirk is scheduled to be born in the future perhaps?.
Gradual when it affects them, but instantaneous and extreme when it affect YOU (remember the overnight wholesale banning of stocks vs. the real problem of Naked shorting?) MF'ers!!!!!!
Actually, 'marked to what current performance means you will expect to have received by maturity' would be good enough for me.
If that happened, there'd be so many 'tits up' financials, they'd have to name the FDIC as the 'new' national money center bank.
Meanwhile, the bonus pools need funding so how about another round of capital raises?
As the market jumps 40 points in 90 seconds for no reason
@#$! Again? Dammit..
Oh and I love the follow through. Plus 40 and stop. Who's Mark2Marking this market?
Straight Up!
Did Bennie B just pour on more rocket fuel?
"Rocket man, Bernanke burning out his fuse up here alone..."
"And I think it's gonna be a long long time..."
The reason is Timmah finished chugging 64 OZ of JOLT and got back on his PPT game!
The boyz are under a hard lash
Damn him and his 8 bit Nintendo!!!!!!! S.O.B!
Freaking lightest vol day of the year. Save the 201Ks at all cost!!!
that'll be 101k's buy the time this is over with....lesson in the hard laws of supply and demand.
Maybe people after this is all over with will ctually find value in assets instead of counting monopoly money litterally. This will be a home buyers dream! Well if you want to own it and have saved during the hard times, hey maybe everyone in america will be able to buy a home because the foreign dollars will get squeezed out too!
I thinking -infinity and beyond k's by the time this is all over.
Although you will lots of nice certificates (similar to the nice ones some still have from Enron) suitable for future use as bathroom wallpaper.
Actually, Timmy powered down a plate of 93-octane gulf shrimp for lunch. Came back and shit his rocket fuel dump all over the ES pit.
Whatever works.
Thanks for the laughs Turd! A former client of mine who was a past vice chairman at Citi once told me,"You can't control market forces and anyone who thinks they can is a fool."
It's all just a bunch of crap swirling the bowl...
making tighter and tighter circles as we approach the drain....
First, banks are only lending to the federal government at this point, so constricting credit won't do much of anything for the real economy. Second, if the banks don't lend, how are they going to make any money? FASB should call the ABA's bluff.
Seriously... lending is the biggest sham excuse I've ever heard. For God's sake, the f-ing administration is inventing legislation to PROD lending to happen. What a joke.
So what's the scoop? Wasn't Charlie G saying the Lehman indictments were going to come down today.
Irrelevant, the market is going ball-to-the-wall into the close just to prove that there will be no god damn pessimism. Your "WE ARE IN A RECOVERY" feeding tube will be jammed further down your neck.
SRS : new 52-week low
SPG : 95.55
Get my man Boilermaker a Boilermaker! He's gonna need it!
I'm out of that shit. My small puts passed away on Sept. 10th without a fight. RIP
Why don't they just mark to a 3 year market average? Cuts out extreme volatility and allows asset prices to reflect changing values.
This won't solve our current problems, but I do understand that extreme volatility of pricing of an asset makes longer term investing difficult.
At some point reality will set in and the poor souls who've been dating these paramours will discover that they have experiencing necrophilia.
The HORROR! Mark to market? That could not *possibly* be a good idea!
Do you realize the NIGHTMARE we would have if homes were valued at 3x income, instead of levered to 12x? The tax revenue we would lose? The *cough* bonuses *cough* fees *cough* we would miss?!?
Don't even TRY to make me put together deals that *make fiscal sense*, or attempt to *bound real risk*!
THE HORROR!
2013.....I can't wait that long...
BRING ON NOW BITCHEZ!!!!
'Government Motors, which as Jonathan Weil reported recently, would have an equity value of negative $6 billion if the bankrupt company's $30 billion in goodwill assets was removed...'
Goodwill Motors mah man... Goodwill Motors...
My God... it's full of cars.
Yea, the auto bailouts are the issue...and the $3B cash for clunkers. Not the multi-trillion dollar cornholing the banks gave us. Way to keep that laser focus on the important stuff.
Am a proud non-partisan hater of all Nancy Capitalism...
I'm a hater of all of it....but I reserve my vile hatred for the banks. You know, I like to channel my rage at the most deserving.
Let's see...seven to eight trillion in equity losses for homeowners, two plus trillion in losses (and growing with Fannie and Freddie losses) for taxpayers....profits for banks (not all banks are bad, just the major players in the subprime scam)...I think they need to contribute their fair share. And the likes of Mozillo, Dimon, Lewis and many others need to be locked up for crimes against humanity; maybe they'll finally figure out how it feels to be cornholed.
I nearly barfed. Un-Fucking-Conscionable, this IPO. No suprise that Cramer wants you in it.
The next thing you know, they will run a TV ad featureing GM’s Chairman and Chief Executive Officer Ed Whitacre saying, “we have repaid our government loan in full, with interest, five years ahead of the original schedule.”
http://www.theoaklandpress.com/articles/2010/05/05/business/doc4be2226b081ce715497575.txt
...and spend $3.5 billion of taxpayer money buying another sub prime lender, just because GMAC worked out so fucking well.
http://www.nytimes.com/2010/07/23/business/23autos.html
In the name of Tyler Durden I swear that I will never buy a GM product.
Yes, because the quality of the products and the millions of Engineers, Accountants, Material Schedulers, Customer Service Reps, Dealers, Suppliers, et al need to be shit-canned because a handful of executives robbed the place blind.
Great logic. Outstanding.
Here is a word for you, Boilermaker. Mal-investment.
Don't forget the marketing team and their great work:
http://www.youtube.com/watch?v=1gq7J71VsDM&feature=related
I'm all for Ford doing great, along with Chrysler. But, Ford was actually the weakest of the 3 going into the crisis. They just happened to have mortgaged everything they owned prior to the credit crunch. Whereas GM and Chrysler had enough (*cough*) cash on-hand at that point.
Nevetheless, the asswipes actually cheering the death of GM and Chrysler can eat a bag of shit. There are literally millions of real, actual, breathing white and blue collar American workers in the industry. Since the distasteful bailout is actually over with (like it or not) I would guess / hope that there might be some general support for them. But, no, let's make sure we force them into final liquidation to prove a principle.
Yea, that makes sense. Of course, it isn't THEIR industry so it's sacrificial.
Your statements indicate to me that you are not a tax payer, you are a tax receiver. You are not alone. Today, about 50% of all American households have at least one person receiving entitlements. This is the highest level in history. Do you think that this is sustainable?
Did you cry for the Enron employees? What about the buggy whip industry?
Mal-investment. It must suck when your income depends on it. Mine does not, therefore this, "ass wipe," doesn't have to, "eat shit." Tonight, I am having steak.
Yes, I did have empathy for the Enron, Worldcom, Health South, Adelphia, et al employees. The key word is employees. I felt nothing for executives that clearly boned them out gluttonous selfish greed.
Congratulations on working in a different industry. You omniscient and glorious d-bag.
Definitely with you on that, we're talking a couple of billion vs. 3 trillion for the banking industry, with about 2.99 trillion of that going to the folks that aren't the bank tellers, personal bankers, telecenter employees, etc. If you're not fully focused on the criminals in the financial industry, you're falling for the obfuscation they want you to fall for.
<ding, ding, ding> Winner.
Maybe if the 22 lb. contract wasn't so offensive, asswipe. It is great sport to bash veterans who go on to work for the DoD here, so buck up, buttercup. It's your turn.
http://www.thecarconnection.com/marty-blog/1016638_right-turn-the-uaw-mo...
Right, because everyone working in the automobile industry is a UAW member. Jesus Fucking Christ, are people really this myopic? They aren't even close to a majority of the total employees. But, hey, why let the facts stand in your ignorant way.
*wonders how big of a loss can be leveraged by a $3.5B GMAC II*
And here I was doing so well at keeping my lunch down today!
The loss will be fractional compared to AIG. Easy answer.
they already had the ad. in response I demanded the CEO's replacement with Big Bird since "we've already paid for Big Bird." What do you think? Or we could all just "give the Big Bird" I guess...
If this goes through, a large portion of this paper will be exposed by 2013, leading to "the best loss is the first loss" rule of thumb being put back into play. That means the first loss would be NOW with a race to the door to shovel this stuff out. But how will they meet the Cap Ratio Requirements? I see another loophole forming somewhere else soon. There is a disturbance in the Force.
Funny how MTM accounting was a great idea when the housing market, et al, was ramping up -- but now, not so much. Right, Chuck?
Negative g's can kill every bit as much as positive ones!
OCI is a component of equity, which is why their shorts have an earthen brown stain in the center. Don't really care if it flows through the p/l....the balance sheet is right and that's the heart of darkness for the banks.
As for the bs about stopping lending....you have to do something before you can threaten to stop doing something. What dog shit these people are.....
fair value, snatches
No big deal, Fed will trade US TSY's for your crap...let's see the accountants mess with those
Ding, ding, ding! Winnah!
If they ever implement MTM in a meaningful way again, you can rest assured that any loose ends known as "the market" are neatly tied up (or should I say POMO'd) beforehand.
All of your toxic paper base R belong to us.
I have a considerable amount of stuff left over from a yard sale. Where do I sign up?
That'd be iust great, RockyR. I cant wait til the US Gov't nationalizes Craigslist.
Too big to fail, donchaknow.
Cheers,
Beef
Timmay is going to get visited, after all
isn't he the mark-to-monkey man ?
WTF? The banks aren't making loans! There is NO demand! If the FASB has any kahoona's they'll make this happen ASAP! I suspect TPTB will shoot this down quickly, though. Woe to the moron investing in financials believing they are a good value!
Well, I would gladly create infinite demand if they would just get with the program and lower these insanely high rates down below zero, where they belong!
Then Timmah could save the banks by offering them even lower negative rates to restore a new finance carry trade.
Can't be any worse than buying up all the worthless crap out there, no?
MTM will happen right after Helo-Ben raises interest rates. Which is right after the Easter Bunny, Great Pumpkin and Santa are elected to the U.S. Senate.
Ball-less bastards will cave again
That pussy on CNBS, 'Bob Piss-on-Me' is more of a shill than Erin. He is such a conformist with his constant bullshit about how the market starts down in the morning and then gets run up by the bulls. He's the ass-kissing queen of CNBS...
You're attributing cunning and conspiracy to what can only be described as stupidity.
Bob "Piss-ant" Pisani is simply ignorant. Don't over think it.
In the end, they are ALL ass-kissing queens. The worthless personalties on CNBC (constant nonsense, bullshit, and crap) are too numerous to mention.
Obligatory "Mutual Assured Destruction" scene from Mel Brooks:
http://www.youtube.com/watch?v=upvZdVK913I
"Hold up, I think he means it!" :D
At least Mark to Myth keeps people in their Homes rent free. This does help the economy. The promise a Modification that never happens so they can work thru their housing supply. Then when there is an opening they can foclose and capatalise on the loss of the Homeowner.
Bankers are Bastards.
so what's your take on your "government as banker"?
So, in other words, there will be no change in lending. 'Nuff said.
Of course ABA screams--FOUL
2009 CGS Board of TrusteesMary Beth McCrory (Chairman)
Senior Vice President, Northern Trust Company, Chicago, IL
J. Douglas Adamson
Executive Vice President, American Bankers Association, Washington, DC
Scott H. Aschoff
Chief Operations Officer, Janney Montgomery Scott LLC, Philadelphia, PA
Carmela Balassiano
Director, Information Technology Services, Deutsche Bank, Jersey City, NJ
Craig S. Dudsak
Managing Director, Citigroup Global Transaction Services, New York, NY
Sharyn Goez
Vice President, JP Morgan, New York, NY
Bill Hance
Vice President, Bank of New York, New York, NY
John LoMonaco
Director, Pershing LLC, Jersey City, NJ
John Mulholland
Director, Global Head Reference Data, RBC Capital Markets, New York, NY
Jim Perry
Vice President, Goldman Sachs & Co., Jersey City, NJ
Denise Russo
Underwriting Director, DTCC, New York, NY
Todd Sullivan
Executive Director, Morgan Stanley, New York, NY
Jane Washington
Vice President, Wells Fargo Bank, Minneapolis, MN
ABA owns the cusip scheme period.
Funny how incest is a crime at the personal level...
Every day I'm amazed TPTB can keep this house of cards standing.
Well, as long as the FASB is powerless, I should try to get a loan for $10 million from my bank. If they ask for my list of assets, I'll happily produce a spreadsheet valuing my 8 year old acura at $2M, my beanie baby collection worth $50M, etc. I should get to make up my own FICO too. Those 6 months of missed mortgage payments are all the post office's fault!
While I agree that banks are hiding severe losses, mark to market is total bullshit.
Markets are not rational, nor are they always honest... just like the banks.
It is not beyond belief that a group of investors could conspire to manipulate values (downward) to their advantage, as was done early in the 20th century.
I am not arguing that this is necessarily the case, just pointing out that the bullshit works both ways.
The "legitimate" concept that you cannot mark-to-market only relates to the concept that some things cannot be priced well (either because the market does not reflect value-and-risk, or because the value physically cannot be computed).
However, that's not how it is used: We do not want to mark-to-market because we *do not* want to value things, nor assess risk (e.g., we want to commit fraud).
This is the same thing as reserve requirements: They only exist to *bound risk*. If things go bad, no problem, you've established reserves upon which you can draw to get you through something that was appraised badly.
IMHO, if a bank drops below reserve requirements for a nanosecond, they should be obliterated with everyone fired. Very quickly you will find a culture that ensures risks are valued appropriately, and reserve requirements are sufficient to buffer unknowns.
Instead, we have impossible leverage, and very profitable fraud. That's the only reason houses are 12x income (which is bad for everyone, and all of society, except the banks).
Actually, according to game theory, it's bad for the banks too because the parasite just killed the host (so now the parasite dies too).
That is ridiculous!
There lies so much opportunity to destroy banks through engineering a panic in the assets that it holds... then, knowing that it is all bullshit, come in and pick up the pieces for pennies on the dollar.
Do you believe in markets or not? As long as information is widely and accurately distributed, there is no reason to believe that buyers of bad loans will "panic" and pay less than the loans are actually worth. To suggest otherwise is to say the market system cannot fairly allocate resources. I know some people think this, but they're all communists. What are you?
fasb is the most dishonest, corrupt, decadent, fraudulent, deceitful, slimy bucket shop of used car salesmen you could find anywhere outside the senate dining room.
any noises they make about truth are slobbers on their cuffs as they figure out how to bend over for the banksters without squealing like a pig.
fuck fasb - it makes richard nixon look like a pillar of moral rectitude.
FASB is meeting expectations. It reports to the SEC. Turd never drops far from the asshole.
Yeah - Chris Whalen thinks they should just flush the bunch and be done with it.
What was the movie Don't be a Menace. Where he pulls a huge RPG out of the van and goes.. Don't make me cause a nuclear holocaust all up in here!!!
God bless FASB for trying to restore sanity.
Don't call them spineless for caving to CONgressional pressure to Mark-to-Bullshit.
CONgress threatened to disband FASB if they did not cooperate, so they would not be able to do any good if they objected to CONgress's demands in 2008.
.....yes, actually it was March '09 when FASB felt Critter guns to head. I remember. The week after the mark-to-myth news broke, Citigroup announced a stunning earnings comeback. BAC the week after. The Dow and S&P launched to where it is today on this entire accounting fraud.
Emergency powers is a wunnerful tool, huh ??
Marky Mark "Good Vibrations".
Nuff said.
If the banks were forced to mark their shit to market, you'd see them get real in a heartbeat about workouts and loan mods (including principal reductions). Once again, government intervention only exacerbated the problems which already existed. One more note, Geitner is proving what an imbecile he really is...he may be an academic genius but he probably cant find the chapter in all his text books where China says "FUCK YOU" because they can! What a dumb fuck...the US has already hit second class status...
If the banks were forced to mark their shit to market, you'd see them get real in a heartbeat about workouts and loan mods (including principal reductions). Once again, government intervention only exacerbated the problems which already existed. One more note, Geitner is proving what an imbecile he really is...he may be an academic genius but he probably cant find the chapter in all his text books where China says "FUCK YOU" because they can! What a dumb fuck...the US has already hit second class status...
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