FASB: OK For USA to Turn Japanese
Just when you think there is a glimmer of hope that some of these ne'er do well, lying, cheating, sniveling, cowardly bank CEOs might finally be forced to step up to the confessional and tell all, this comes along: FASB Postpones Off-Balance-Sheet Rule for a Year.
Which makes me wonder: How precarious is the financial health of the US banks and brokers that they need yet another year before they can, oh, I don't know -- disclose what they own on their balance sheets?
Ubiq-cerpt:™
"The Financial Accounting Standards Board postponed a measure, opposed by Citigroup Inc. and the securities industry, forcing banks to bring off-balance-sheet assets such as mortgages and credit-card receivables back onto their books.
FASB, the Norwalk, Connecticut-based panel that sets U.S. accounting standards, voted 5-0 today to delay the rule change until fiscal years starting after Nov. 15, 2009. The board needs to give financial institutions more time to prepare for the switch, FASB member Thomas Linsmeier said at a board meeting.
"We need to get a new standard into effect,'' Linsmeier said, though ``it's not practical'' to begin requiring companies to put assets underlying securitizations onto their books this year.
FASB proposed having companies put new securitization structures on their balance sheets for fiscal years starting after Nov. 15 this year. The Securities Industry and Financial Markets Association and the American Securitization Forum complained that the changes, which could affect as much as $11 trillion of off-balance-sheet entities, may make companies appear short of capital to regulators and lenders. Financial companies' responses may in turn worsen the credit crisis by further constraining lending and investing, they said."
The longer they wait, the worse it ultimately will be. The long Japanese Recession (1989-2003) was caused by precisely this refusal to take the markdown, and engage in all manner of delays, excuses, procrastinations. Eee-diots -- This only will make it worse!
Here's the money quote:
"Under FASB's Statement 140, one of the rules the board is considering changing, the trusts can remain off-balance-sheet if their activities are "significantly limited'' and "entirely specified'' in the legal documents that created them."
Man, if ever a legal clause was made to be folded spindled and mutilated, this was it.
Question: How can anyone value a financial company if they cannot tell what are on their balance sheets?
Answer: You cannot. If you buy a financial under these conditions, you are flying blind.
Investment Thesis: Ritholtz Rule #1: Know What You Own.
Whoever buys Financials under these circumstances loses the right
to whine down the road about companies not being forthcoming. If you
own them, don't complain when you get what you deserve.
>
Source:
FASB Postpones Off-Balance-Sheet Rule for a Year
Jody Shenn and Ian Katz
Bloomberg, July 30 2008
http://www.bloomberg.com/apps/news?pid=20601009&sid=a4O4VjK.fX5Q&
Wednesday, July 30, 2008 | 09:30 PM | Permalink
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Comments
I think we're turning Japanese, I think we're turning Japanese, I really think so....
Posted by: HCF | Jul 30, 2008 9:43:48 PM
Stunning. I guess things like Sarbanes-Oxley don't apply here as well? Probably more selective enforcement like the short selling.
Posted by: Spud | Jul 30, 2008 9:46:23 PM
this is overkill. i'm sure we've got no more than 2 or 3 more enron's out there.
Posted by: brent | Jul 30, 2008 9:50:31 PM
Would they take the whole country down to protect the banks?
Yes.
Posted by: wally | Jul 30, 2008 9:51:39 PM
Unbelievable. This is what Sen. Mitch McConnell, that tool from Kentucky, means when he yammers on about "free speech." Yeah, right.
Posted by: MitchN | Jul 30, 2008 10:04:57 PM
So, let's count who's panicking over the banks: we've got the Fed, the Treasury, the SEC, and now FASB... they have circled the wagons, because they know that the situation is dire. that is the only excuse (if you can call it that)... but, hey, we've had another mega-rally in financials on MER's "great" news (cough, cough), so i guess they must be happy with their "work" so far... i can't believe that it's come to this! Rome is burning, and everyone is fiddling as fast as they can!
Posted by: kensdad | Jul 30, 2008 10:07:26 PM
Merely trying to stretch out this fiasco for as long as possible until the next bubble is created. Then it's off to the races again! Yippeee!!
Posted by: Jeff | Jul 30, 2008 10:16:46 PM
When you add the Fed's extension of their emergency facility to the end of January 2009 to this, we are in deep yogurt.
Posted by: Tom | Jul 30, 2008 10:34:04 PM
I think it's funny, filthy, and dishonest that the truth is getting pushed forward to the next administration. The IMF audit of the US's books should be coming out shortly after election or swear-in of Obama too.
Poor guy, he doesn't realize what he's getting himself into. If he did, he would quit his campaign.
Posted by: Rich_Lather | Jul 30, 2008 10:43:12 PM
Talk about financials digging their own grave... let it sink for a day or two, common sense will prevail and long term holders will sell due to 18 month uncertainty this brings.
Posted by: Mich(^IXIC1881) | Jul 30, 2008 10:49:03 PM
What's so funny about everything going to shit in this country? I personally don't find it funny at all.
Posted by: Jeff | Jul 30, 2008 10:50:08 PM
All of this corruption.... This is not the America that I remember. Now I am beginning to understand the rally in financials that has been ongoing for the last couple of weeks. Since the liars and professional thieves will not have to come clean with what is on the balance sheets, they can perpetuate the fairy tale for another year.
Do morals or ethics ever count anymore?
Does anyone know who gets to keep the money from a naked short sale? I'm wondering why it is allowed for any stock.
Posted by: GaryK | Jul 30, 2008 10:55:36 PM
Oh do I love this decision. If SKF has been a great trading vehicle over the last year, it will be even better over the next year.
Wake up folks. Yes, I agree what's going on stinks to high heaven, but why moan about it when you can benefit yourself and your kids by taking some action. The federal government is screwing your kids and grandkids royally, so why not take some defensive action on their behalf?
tomd
Posted by: tomd | Jul 30, 2008 10:58:21 PM
Apparently they are running of ideas to hold up the shantytown called Wall Street. Here are some more ideas for them:
- Force buyers of financials stocks to keep them on their books for 90 days
- Increase SEC fees on sales of stocks 2% of sale price
- Brokers are forced to differentiate commissions on stock sales (buying $4.99, selling $159.99)
- Stop options market makers to create/sell deep in the money puts
- Brokers are banned from having client stocks on street name, stock certificates are to be snail-mailed to buyers via USPS
- 401K fund choices to be reduced to "large financials", "midcap financials", "small cap financials", "international financials" "fnm/fre bonds", money market, and funds of funds made from a combination of these.
Yeah, that should do it
That should do it.
Posted by: Mich(^IXIC1881) | Jul 30, 2008 11:04:15 PM
This continuing nonsense of Balance Sheet Three Card Monty, Mis-statements from some of the CEO's of Major Investment Banks to either obfuscate how much Bad Debt they still have-- or because they do not know how to put a value to it-- and SEC and FASB Rule Changes plays into my theory that we won't see a "Bottom" begin to form in the Financials until one or more of these Major Investment/Commercial Banks gets Bought Out--UnAssisted From the Federal Reserve/FDIC--by another Major Bank.
Then you'll have a good idea that said Bank has done some Hard Core Accounting Due-Diligence, can put some market value to their Toxic Off-Balance Sheet Crap, and therefore feels confident about the failed Banks True Valuation.
And I think we still have a long way to go before we get to that point.
Posted by: John | Jul 30, 2008 11:08:20 PM
Better yet, lets forget about the short selling and only allow transactions that are on the buy side! That way the "value" of equities will just keep going up and up!
Everyone keeps talking about what the next bubble is going to be... duh... it's the financials!
Posted by: Rob P | Jul 30, 2008 11:10:50 PM
Lighten up, Barry! Don't you know Cramer just called a bottom?
Posted by: Namazu | Jul 30, 2008 11:11:31 PM
Maybe investors will vote with their feet. But then they'd have to know what they were running from and I don't think CNBC will tell 'em.
Posted by: Mike in NOLa | Jul 30, 2008 11:13:24 PM
After looking at earnings for the past two quarters, I remembered that the only earnings that gets audited is the 10-K. No one knows how bad the numbers really are until then.
I think you might find this essay on US Tax receipts interesting: http://www.financialsense.com/editorials/benson/2008/0730.html
How will the US continue to convince other countries to loan us money after this?
Posted by: Juhuti | Jul 30, 2008 11:16:46 PM
Anyone who can conduct some independent thought will stay far away from financials. The industry pushed for FASB to delay implementation for a reason. It's not difficult to figure out what that reason is. Wow. "Caveat Emptor" if it ever applied to anything, at any time, it applies to financials.
Posted by: Stuart | Jul 30, 2008 11:28:52 PM
Man, Barry, you're on fire of late. I could not agree with you more. This reminds me of my days in college when I had a bad car but no money. Every time I took it to the mechanic, they said it cost X (small amount) to put bandaids, but cost Y (significantly larger amount) to fix it right. Guess what I chose between car money versus beer/girls money? Had I just took my medicine at the time, I woulda been better off. The US needs to take its medicine.
Posted by: investorinpa | Jul 30, 2008 11:38:31 PM
I think some of these banks are now Enrons.
Posted by: lew dunbar | Jul 31, 2008 12:07:26 AM
Guess what I chose between car money versus beer/girls money? Had I just took my medicine at the time, I woulda been better off.
Hmmmmm. Maybe someone should define better off. Beer and girls vs car. I know where I stand.
Posted by: JP | Jul 31, 2008 12:24:59 AM
Odd how the pop nom de jeur only last month was "waterfall charts", yet already, not even a month later, it's "gapped sharply lower".
Just think what their financial lexicon will be tomorrow? "Gaping maw of Saturn" charts?
http://upload.wikimedia.org/wikipedia/commons/thumb/7/77/Saturno_devorando_a_sus_hijos.jpg/300px-Saturno_devorando_a_sus_hijos.jpg
Posted by: Nom Deguerre | Jul 31, 2008 12:31:15 AM
For that last statement, the SEC will probably investigate Barry for "rumor spreading". I'm only half joking.
Posted by: Victor | Jul 31, 2008 12:37:35 AM
