Hey, congrats to the banks. You've officially cowed not only Congress but now FASB which has decided that you can continue to value assets however the hell you feel like. I mean, it's not like it's ever gotten us into trouble before, right?
It is ridiculous that banks can continue to value mortgage loans at 100% of their value on their books when it's clear to everybody and their mother that there is no way that the assets are worth nearly that much. Banks don't have to take a loss until they actually sell an asset, allowing them to manage earnings pretty much at will.
Ridiculous.
Via WSJ.com
The banks got what they wanted. Accounting rule makers on Tuesday dropped a plan to require banks to value loans using market prices.
That means investors will remain reliant on banks' own views of the worth of their assets. Those judgments proved seriously flawed during the financial crisis and left many with insufficient capital. Taxpayers, who as a result were called upon to bail out numerous institutions, also are left more vulnerable.
The Financial Accounting Standards Board's original proposal, put forward last spring, had called for banks to reflect market values in the total worth of their assets, which would affect their equity. Changes in market values, however, wouldn't have immediately affected profit, nor would it likely have been reflected in measures of regulatory capital.
Banks generally oppose the use of market prices because, they say, it makes their results more volatile. Their intense lobbying efforts against the proposal likely got a leg up after FASB Chairman Robert Herz, who had supported the plan, unexpectedly departed in August. FASB cited strong opposition it received in public comments in changing course.
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