Banks Given More Leeway in How They Value Toxic Assets

[CoffeeCat]

Source: CNBC

(snip)
The changes will allow the assets to be valued at what they would go for in an "orderly" sale, as opposed to a forced or distressed sale. The new guidelines will apply to the second quarter that began this month.

The mark-to-market rules have forced banks to take steep write-downs on some assets, especially securities tied to high-risk subprime mortgages, as the industry has reeled from the housing market slump and banks have foundered and failed.

The banking industry and lawmakers of both parties have been pushing for the rules to be relaxed. An estimated $2 trillion in soured assets is gumming up banks' books.

In an ironic twist, the new leeway for banks could undercut the government's new financial rescue program in which it is joining with private investors to buy up about $500 billion in toxic assets from banks, some experts say.

The fear is that companies will use the leeway to boost the value of the assets on their books to "unrealistic levels," Robert Willens, an expert on tax and accounting issues for Wall Street clients, told The Associated Press last week.

Read more: http://www.cnbc.com/id/30009862

---

Remember, these are the same banks that:
---Contributed to political campaigns so they could get the deregulation that they wanted.
---Used that deregulatory environment to make billions selling us vulnerable mortgages
---Packaged these bad mortgages into toxic financial instruments--making billions AGAIN by selling them to secondary markets.

So, these same banks have been given "more leeway in how they value these toxic assets."

In effect, these banks will purposely overvalue these toxic assets.

So, guess what? This couldn't happen at a more opportune time for these banks, because the government is about to purchase
these toxic assets with YOUR tax dollars. Now the banks can value this CRAP higher and get more money
for it.

Wow---does this horrendous, perverse scam EVER end--and does our government EVER stop helping these criminals
steal, again and again and again, from average Americans?

[Oregone]

1. Surprise, surprise

People have been screaming about this as a problem. Though some here stick to their adherent belief in "hope" that government oversight will magically fix the feeding trough. The bill for this bailout will be outrageous, as will the additional subsidy to the rich investors.

[napi21]

2. I'm not sure how I feel about this move. I honestly believe the banks have

currently undervalued many of their assets,,,mostly because they're all traditionally not risk takers at all. Will they over value them now??? Who knows. It;s probably a mixed bag of some banks will and some won't.

[Oregone]

6. They have incentive to over-value them, and investors have incentive to purchase them

The banks incentive being profit, and the investors incentive being that the purchase is almost entirely financed by the government (who is assuming an 85% liability).

The banks face zero risk with this plan, despite what they do. The government is essentially taking on all the risk (negating any free market mechanism) so this could potentially get really out of control.

[rfranklin]

9. I value my house at $3 million, can I refinance with govt. dollars?

Of course, it's only worth one tenth of that, but the investors are backed up by government guarantees and they can keep any profits.

[Tansy_Gold]

3. If they over-value their assets, does that mean they don't get

any more bail-out money?

Fine with me!



Tansy Gold

[CoffeeCat]

4. But it's the BANKS who get to decide...

This move allows the banks to value these assets. They get to decide.

The value is what the banks say. PERIOD.

Not only will the banks get the bailout money--they'll use that bailout money to buy
their rotten hamburger at t-bone prices.

Wow, we get to watch ourselves get robbed in real time! :eyes:

[marketcrazy1]

5. banks have not written down their assets more than

a few percentage points. I have a table here you can look at. it seems the solution to FRAUD is to make it legal ............... link,, http://www.tickerforum.org/cgi-ticker/akcs-www?getimagenr=23453

[blueworld]

7. repost of my snark at McClatchy (who has a great article on this)

I have a fine collection of assets (in a shoebox) called "Beanie Babies", which I bought during the BB bubble. They currently have no market & therefore no value, making my financial health look much worse than it is. Especially since I'm unemployed & living off my 401K contributions.

I'd planned to hold these assets to maturity & retire on the proceeds.

So, I would like to revalue them to what I THOUGHT they would be worth at maturity & use that figure to buy an annuity to live on in my golden years.

This allows me to raise my own capital, and relieves me of stupidity because my distressed assets will no longer be temporarily depressed by this financial crisis. :sarcasm:

[CoffeeCat]

8. That's exactly what they're doing...

...and I am so outraged right now.

My biggest fear is that people won't understand what is happening. They won't get it.

I wish sometimes that I didn't get it.

Hold me! :scared:

[napi21]

13. I don't thinl that's a valid comparrison. Disregarding the homes that

have been vandalized and stripped of wiring, appliances etc., the homes that are existing do have value. When the job market improves, they will sell. Beanie babies is totally different, and there may never be any value. I would more compare the housing market today to the gold market. Not so long ago gold was selling at $300+ an ounce, now it's $800+, but it never completely lost it's value.

[CoffeeCat]

15. He's not comparing Beenie Babies to sub-prime mortgages...

He's drawing a parallel between the sub-prime mortgage owners and himself as a Beenie Baby owner.

The nut of his argument is that it's wrong for the holder of an asset--to determine the worth of that asset.

The market determines the worth. Not the asset holder.

That is the comparison.

[Tansy_Gold]

20. Beanie Babies have more value than "toxic assets."

It's not the sub-prime mortgages that anyone is really worried about. At least there's a home or some real estate.

The real toxic assets are the imaginary "instruments" that got concocted by some financial geeks who have no concept of reality. These are IMAGINARY MONEY. IT HAS NO VALUE WHATSOEVER. It's a bet that can't be collected because one party (AIG) is bankrupt but everybody else wants their winnings anyway.

Beanie Babies are at least cute and cuddly. They're worth a helluva lot more than a parimutuel ticket on an also ran.



TG

[mbperrin]

29. But shouldn't I be able to take my also ran parimutuels and value them at

what I thought they were gonna be when my horse won? The trifecta!

Good gawd, I've got to get to the track before they empty the trash! There's a FORTUNE in those cans!!!!!!!!!!!!!!!!!

Hey, and don't forget those losing lottery tickets! I thought they would be worth MILLIONS, so surely I can value them at that and have the taxpayers pick it up!

All I gotta do is change my name to MBPerrin Bank Hedge Fund Insurance Group Brokers Savings, Inc. YIPPPEEEEEEE!!!!!


I'M RICH! RICH! RICH! (Channeling a little Daffy Duck here ;)

[Vidar]

10. Just more power given to the thieves.

[Dreamer Tatum]

11. This actually will encourage banks to lend money again

But by all means, feel free to flail away in blind rage.

[marketcrazy1]

12. how exactly will this encurage banks to lend more money?

these guys are not stupid, in fact they are quite brilliant, the got the taxpayers to assume hundreds of billions if not trillions of their losses, they kept their cushy jobs, they will show a "profit" now, so they get their bonuses. but they are NOT blind... unemployment continues to rise, home values continue to fall, credit losses on consumer lines ( credit cards, auto loans and small business ) are at historically high levels, corporate bankruptcy's are high and accelerating and tax revenues are falling. consumer credit worthiness is declining. so who will they lend to and why should they! it is much safer for them to minimize lending until a real turnaround takes place. I dont think we will see any significant increase in lending any time soon..............

[Kool Kitty]

31. I agree with you.

I kinda think that maybe it isn't so much that the banks aren't lending, perhaps they don't have many customers that feel in a position to borrow?

[CoffeeCat]

14. So much focus has been on "unfreezing the credit markets"...

...so the banks can loan money.

The supply side isn't the problem. So what if banks will loan more money?

The problem is the American citizen who doesn't have a job, or is worried about
their job. They're not going to run out and get loans just because the banks
are able!

The problem is also small business. People are frightened (due to the unemployment
situation) and they're not spending. Small businesses are failing. These businesses
are holding on for dear life and struggling to make payroll. These businesses aren't
looking to expand or take on new debt. Again, these small businesses aren't going to rush
out to borrow, just because they banks feel comfortable doing so.

The problem is on the demand side---with the consumer.

Everyone wants us to focus on the banks. Could it be that they're doing this as an
excuse to throw more of our money at them??? "Oh look the economy is terrible! If
only the banks could loan more money! Let's give them billions!"

This entire fiasco is so rigged, corrupt and filled with lies and daily propaganda--that I can
barely hold my head up to read the articles any more.

[Oregone]

17. Why would they lend money? The business environment is bad

Banks do not lend money because they have it, or because they are happy. Banks lend money to make profit, and they do so according to investment criteria. A bank will not lend money, despite liquidity, if they have no assured ROI (within some measure of risk).

This is part of the problem with focusing on the banks to fix the issue. Until the conditions on the ground are addressed, a solvent or insolvent bank would be foolish to make personal or business loans.

[CoffeeCat]

19. Well, with everyone screaming....

..."The banks!! The banks!! We must save the banks or the world will collapse!!" that paves the
way for the bailouts and the billions funneled to the banks.

I'm thinking that the focus has been on the banks--in order for the banks to steal our money.

What about the soaring unemployment in this country? Is that not a crisis?

Why aren't we helping people who don't have jobs and have no health insurance?

Doesn't our entire economy (which is 70 percent consumer spending) totally tank if people squirrel
away every dollar they make because they're afraid to buy even a pack of gum--for fear they'll soon
have no income???

And people think that these fearful Americans (millions of whom are unemployed) are in the market
for a loan right now????

This heist and the propaganda being used to rationalize and explain it--is getting absurd.

It's like a Blake Edwards movie!

[Zhade]

23. It's extortion, plain and simple. "Nice economy ya got, shame if someone were to wreck it..."

NT!

[CoffeeCat]

24. LOL!

That's exactly what has happened...in Tony-Soprano-like fashion.

[Zhade]

22. What color is the sky in your fantasy world?

Be prepared to suffer a lot of "Thank God It Passed!" I-told-you-sos when they DON'T do as you laughably suggest.

[TheWatcher]

25. Whatever that is is on my Ignore list so Thankfully I missed whatever deluded

Proclamation they spewed out.

In fact I think I have the whole "Thank God It Passed!!!!!!!!!11111111111111" Brigade on my Ignore list, so at least some of the Zombie Noise is missed.

Some of our population is just acting brainwashed when it comes to what is going on with the economy.

And some of the justification and apologist nonsense I have been reading regarding this particular issue today is denial/Good German to a level that borderlines on mental illness.

The country is going down by the head economically, and some people actually think we should be GRATEFUL for it.

:banghead:

[bvar22]

27. Oh yeah.

That worked so well when they tried it the first time.

Now we got Your Children's Money too !
And there is not a fucking thing you can do about it !
Now THATS Bi-Partisanship".
Better get used to it !
Hahahahahahahahahahaha!


Just a few more $Trillion, and those credit markets will loosen right up I'm telling ya.
Trust me.....again.

[Dreamer Tatum]

32. OK, I will explain it. And thanks for proving me right re: shrillness.

I'M NOT SAYING IT'S RIGHT, BUT...

Banks have bad assets on their balance sheets. If they had to mark them to market, the "market" would assign unreasonably low values to those assets in light of the difficult capital environment. Banks' credit ratings depend on certain financial ratios; fully marking to market would cause those ratios to bug out and would cause liquidity problems for banks.

By giving the banks a little room, it would be possible to unfreeze some of the cash that is captive on the balance sheet, so that more normal economic activity can occur, which would then justify the higher valuations placed on troubled assets.

Feel free to burst a blood vessel, though.

[closeupready]

16. I'm not sure how much more of this theft of taxpayer money people are going to tolerate.

Especially since the middle class has gotten virtually NOTHING to help them during their own financial struggles.

This has got to stop.

[dysfunctional press]

30. we'll probably find out pretty soon.

the worst, as they say, may be yet to come...(i used to love it when batman ended that way.)

[primavera]

18. Oh, goodie

Just what banks need - still more leeway with which to defraud the country out of even more money. What a relief! I was worried for an instant there that a crumb or two might escape unstolen. I should have had more faith in the American system.

[gulfcoastliberal]

21. Recommended. Just substitute WORTHLESS for "toxic". Wow.

Legalized theft.

[LeftHandPath]

26. Imagine...

If we could spend all this wealth on something other than bailing out insolvent banks...

Health care, education, infrastructure, mass transportation...

But no, we need to keep banks with multi-trillion dollar loses from collapsing. Why? Because they own us.

[marketcrazy1]

28. I just read the big banks

are trying to get in on turbo timmy`s PPIP plan, they want to buy toxic assets from each other!!! since losses go to the taxpayer..... so they will bid up the price on each others crap and stick us with the losses!!! can you believe this shit!! FUCKING THIEVES!!!!!!!!!!!! i KNEW this would happen!! of course this will be perfectly acceptable to the government and regulators,,, at least that is what they are saying so far............

[Marie26]

33. This can't be good.

So the banks need *more* creative accounting to wipe those debts away!

[xchrom]

34. kick