Change In Mark-To-Market Accounting Saves Taxpayers $250 Billion
Buried in Friday's $2 trillion upward revision to the 10-year deficit projection (officially from $7.1 trillion to $9 trillion) that leaked not-so-quietly after the close of trading, was word that the '09 deficit will be $250 billion less than forecast. These are funds set aside for additional bank bailouts that have not yet been needed.
- The White House budget office will also lower its deficit forecast for this fiscal year, which ends September 30, to $1.58 trillion from $1.84 trillion next week after removing $250 billion set aside for bank bailouts.
How did this happen? What does it mean? And what are the costs for perpetuating illusion?
If you remember from this Spring, 'whistle by the graveyard' demanded Congress. And FASB quickly complied with a change to fair-value accounting rules, specifically FASB 157. Soon after, banks began to report greatly improved profit numbers for the 2nd quarter, no small coincidence.
Some could make the case that FASB has begun to exhibit some backbone of late, but I find it hard to believe that once the banking oligarchy and its lobby kick into gear that Congress will allow this new proposal to be passed.
This is the fleeting, ephemeral upside to becoming Japan and losing the next decade -- we get to lie about asset values. Less support from taxpayers is required, for now. But don't forget the whole point of being Japan is that every few years for the next 10 (at least), we will be committing additional funds for bank bailouts.
The workout is merely being prolonged. Drip, drip, drip. Kick that can as far down the road as the mighty leg of ignorance can deliver.
Examine the simple steps. Suspend mark to market; allow banks to make write-ups on entire asset classes. Profits are then improved (created), and banks are able to raise private capital. Dumb, private money chasing ghostly bank balance sheets is preferable to forced taxpayer investments, so I admit the changes haven't been all bad in the short term.
However, I still believe, like Jim Chanos, that we needed regulatory capital forbearance and not an outright gutting of FASB 157. And I'm haunted by the spectre of a Japanese style banking slogfest that could last decades. The bad assets are still there, they've just been forgotten.
Aug 24, 2009 at 3:32 PM
Reader Comments (16)
Has a thorough links collection of stories on FASB, and Congress's attempt to influence.
http://dailybail.com/home/international-accounting-panel-blast-congress-for-threatenin.html
http://dailybail.com/home/bailout-mark-to-market-accounting-jim-chanos-discusses-the-g.html
http://dailybail.com/home/2009/3/6/must-see-cnbc-bailout-videos-jim-chanos-says-we-will-see-ora.html
http://dailybail.com/home/obama-raises-10-year-deficit-forecast-to-9-trillion-2-trilli.html
Rochdale Securities analyst Bove says 150-200 more US bank failures possible in current crisis
On Monday August 24, 2009, 1:27 pm EDT
CHARLOTTE, N.C. (AP) -- Banking equities analyst Richard Bove said Sunday that it's possible 150 to 200 more U.S. banks could fail in the current banking crisis, putting greater stress on the Federal Deposit Insurance Corp.'s deposit insurance fund.
The FDIC, which insures deposits, may be forced to turn to non-U.S. banks and private equity funds to help shore up the banking system, the Rochdale Securities analyst wrote in a note to investors.
Among the 81 banks closed so far this year -- compared with 25 last year and three in all of 2007 -- were a stream of smaller institutions, many ruined by losses on ordinary loans amid the souring economy, tumbling home prices and spiking unemployment.
The FDIC expects bank failures will cost the insurance deposit fund around $70 billion through 2013. The fund stood at $13 billion -- its lowest level since 1993 -- at the end of March. It has slipped to 0.27 percent of total insured deposits, below the minimum of 1.15 percent mandated by Congress.
Banks' payments to keep the FDIC afloat could eat up 25 percent of their pretax income in 2010, according to Bove.
The FDIC last week seized Colonial Bank, a big lender in real estate development, and sold its $20 billion in deposits, 346 branches in five states and about $22 billion of its assets to BB&T Corp.
It was the biggest bank failure so far this year, and the sixth-largest in U.S. history, expected to cost the insurance fund $2.8 billion.
On Friday, regulators shut down Guaranty Bank, a big Texas-based lender afflicted by loan losses. It was the second-largest U.S. bank failure this year.
The costliest failure was the July 2008 seizure of big California lender IndyMac Bank, on which the fund is estimated to have lost $10.7 billion.
Latest in Stimulus: 'Cash for Refrigerators'
http://news.yahoo.com/s/bw/20090824/bs_bw/aug2009db20090821304909
The interesting thing about Barry's giveaway program is not the program but the fact that the Business Week article doesn’t mention the President. Hey Daily, did I miss the memo? I think the hush hush on Obama in the media will backfire both here and abroad if you catch my drift.
Free Speech, Free Gobias!
http://www.youtube.com/watch?v=LfDibgiWyd0
"Boorishness and shouting have replaced respect and civility. The meetings with members of the state's Washington delegation were magnets for a grab-bag of unfocused rage, much of it aimed at issues far afield from health-care. There were folks protesting abortion, illegal immigration, the banking and auto company bailouts, socialism, President Obama and even the end of the gold standard."
http://www.wrni.org/blog/scott-mackay/health-care-forums-shouldnt-be-called-town-meetings
Boorishness, shouting and unfocused rage: I'd call this meeting a solid success. I don't care what they're mad about -- I'm just glad they're finally getting mad.
Maybe the people are mad because of a LACK of things to be HAPPY about....AB
BAM'S $2 TRILLION...I know, we don't like saying Obama in here because now that a democrat socialist is in office, we can hide our bias by saying down with them all. Yeah, I get it. But really, Barry should get some of the credit right?
Govern like a Socialist, Vacation like an Elitist!
Free Speech, Free Gobias!
Free Speech, Free Gobias!
My statement to the banksters:
First let me say that I am for peace. I do not believe that citizens should take to arms because with technology being what it is, that would prove hurtful to our children and grandchildren. But I do call for the government and or military of the United States to do what is necessary, including the use of force to protect the United States citizens from the bankster cartel. The great American experiment was the result of the founding fathers determination to be free of the central bank of England, a private bank, and our independence is derived from that protection of our people by the founding fathers. As to the present state of affairs, here is my statement:
You banksters have the AUDACITY to ask us to cooperate with you in your economic recovery after you have killed the golden goose of world prosperity, we consumers right here in the USA.
There is such a thing as divine retribution for unscrupulous behavior, even a greater judgement for that which hurts many, many people! We have been deceived by your fancy Bank of International Settlements (BIS) and its tools, the Federal Reserve Bank and FASB. You have given us off balance sheet banking and ponzi loans. You robbed our treasury. You hit us with mark to market. You threaten that again in 2011. You plan to put the off balance sheet toxic assets, which you devised, back on to the bank balance sheets in 01/2010 to hurt the banks and make us buy treasury bonds out of fear even there is no intrinsic demand for that massive debt. Had you not allowed off balance sheet banking in Basel 2 you could have maybe gotten away with your evil deeds. But what is done is done.
I declare to you banksters (and plead that our government to take note) that the Bank of International Settlements is public enemy number one of the United States and should be taken down, by force if necessary. http://bank-abuse.com/TowerofBasel.html
The United States government, or military if necessary, has the duty to protect the American banks from these banksters so that our big banks, such as Bank of America, JP Morgan, Goldman Sachs, Citibank and a few others, will not feel the desperate need to take advantage of the citizens of this country with unfair loans and interest rates and fees. Woodrow Wilson said 1913 was a time of great error. That is when he allowed the arm of European Central Banking, known as the Federal Reserve, to usurp the monetary power of the congress of the United States and her citizens.
It is past time that we urge our military and civilians in power to do something about this to save our nation from years of financial ruin.
http://hubpages.com/hub/The-Abuse-of-the-Middle-Class-by-the-World-Elite
Good find on the Hedrick clip.