With the new mark-to-market rules put in by the Fed it will definitely help the banks quarterly profits because the banks can say their toxic assets are whatever they want them to be all the while disguising their true value which is billions of dollars higher.
According to the
Wikipedia entry for "Mark to Market:
"On March 10, 2009, In remarks made in the Council on Foreign Relations in Washington, Federal Reserve Chairman
Ben Bernanke said, "We should review regulatory policies and accounting rules to ensure that they do not induce excessive (swings in the financial system and economy)". Although he doesn't support the full suspension of basic proposition of Mark to Market principles, he is open to improving it and provide "guidance" on reasonable ways to value assets to reduce their pro- cyclical effects.
[17]
"On March 16, 2009, The
FASB have proposed allowing companies to use more leeway in valuing their assets under "mark-to-market" accounting, a move that could ease balance-sheet pressures many companies say they are feeling during the economic crisis.
"On April 2, 2009, after a 15-day public comment period, the
FASB eased Mark-to-Market rules. This change still requires financial institutions to mark transactions to market prices but more so in an steady market and less when the market is inactive. To proponents, this removes the unnecessary "
positive feedback loop" that can result in a deeply weakened economy.
[18]"
Therefore, is it any wnoder why the markets went insane last week when Wells Fargo showed a billion dollar profit last week? I say, "No kidding Sherlock". Do you think they would show a decline when they can price their toxic assets at any price they want? All the while hiding their true losses and red ink!
Consider this also from the Wikepedia entry:
"Companies can use the new guidance when issuing their first-quarter financial statements.
[19] Such changes could significantly boost bank statements of earnings and loses
[20]. The
FASB changes, however, are for acceptable accounting standards applicable to a broad range of
derivatives, not just banks holding
mortgage backed securities.
"
Opponents argue that the implications for
investors are that the valuation of assets underlying such securities will be increasingly difficult to analyze, not less so. An example would be determining a company's actual assets, equity and earnings, which will be overstated if the assets are not allowed to marked down appropriately.
[21]"
Therefore, again we are being lied to and the pundits and talking heads on TV are telling us the worst is over and that the end of the recession is near. Don't believe them for a second! It is FAR from over and the world's debtor economies, like the US, will suffer greatly in the next two years. If anyone decides to gamble on the markets, please just drop your money into the sewer because you will lose it one way or another. The only ones who will be the winners will be the owners of the "Casinos" like Goldman-Sachs et al. They are just throwing a little more bait into the water before they finally pull up the net with even more of your money in it. Don't be a fool.
Speaking of the Japanese yen, some have recently predicted JPN 117/US$ again and I hope they are right because I would just buy more as it will eventually strengthen to JPN 80 - 70/US$, if not lower before this is all over.
