Sentences to ponder

That is certainly my hope. I would rather that the banks be allowed to more accurately represent these securities on their balance sheet instead of selling them to the government or the government’s protected investors. The problem with both changes is that there is a lot of moral hazard inherent.

Of course, if the FASB had made this change months ago, we may not have needed the new Geithner plan (or any of the previous plans). In fact, we may not need it now, except as a confidence stimulus that the banks won’t fail.

can’t we just find this mark guy and confiscate his bonus?

“Of course, if the FASB had made this change months ago, we may not have needed the new Geithner plan (or any of the previous plans). In fact, we may not need it now, except as a confidence stimulus that the banks won’t fail.”

I find it highly unlikely that some sort of softening of FAS 157 would have had a significant impact on the need to alleviate banks’ capital positions by either injecting more capital or reducing the assets on the balance sheet. Further marks on banks’ held for sale portfolios seem fairly immaterial with respect to recent loan losses and provision building. Keep in mind, mark to market has no bearing on loans that are not “held for sale”. If anything, the purchase of assets will help banks stay above water by reducing their risk weighted assets, which directly impacts Regulatory Capital.

While I agree that some reversal of FAS 157 would make the “Geithner” plan relatively less attractive, I would think the direct benefit to Regulatory Capital by getting assets of the books would entice banks to take the hit and get on with life. If Reg Cap goes, it’s game over. No bank is going to be able to raise capital at a price that would benefit their Tier 1 more than the cash going out the door without additional support from government. This being said, getting assets off the books seems like a pretty good idea if an institution is worried about meeting minimum regulatory capital requirements.