Sigh... It's a probabilistic/FMV analysis under a wide range of market and business conditions.
So while your post seems to indicate you think the analysis is/should be simple... Why you'd love it to be simple... Why it's just common sense that it should be simple... Piffle. That's all head-in-the-sand rationalization because what you want to do is complain instead of thinking the issue through. It's almost like you've been infected with the wing-nut virus of over-simplification-and-wool-gathering and are looking at the past for your simple answers instead of trying to deal with the present and it's complex ones. Complex problems are complex and the solutions are equally complex and yearning for the "golden ages" of the 1950's, even unwittingly, is just as silly from the left as the right.
Also, like virtually everyone who seems to have an opinion on these balance sheets, you don't seem to have a clue about GAAP which is no longer your grandfather's GAAP. And, if it were, they'd all be fine because we'd be using historical costs, less permanent impairments, for the impaired assets and the balance sheets would look wonderful....
Instead, in the 1990s we went to "fair value" accounting for certain classes of marketable securities. I, personally, didn't like it because at the time it was an obvious attempt to keep highly inflated assets (because of market booms) and recognize the profits that were not yet realized. I'm really conservative about recognizing unearned income vis these security-fluctuations. It's a core accounting principle of mine that "paper profits" are cute, but until you've actually realized the gain, you shouldn't recognize the gain. Decoupling realization and recognition... Not the smartest of things when you, ultimately, have little power to do anything but your clients bidding (even if you wanted to; see Enron and other early 2000's accounting and auditor scandals)...
Now, we're in financial hell and suddenly many of the players that wanted mark-to-market think it isn't such a good idea. And I get a good laugh.
There are three kinds of securities covered by GAAP (FAS 115):
(1)Debt securities that the enterprise has the positive intent and ability to hold to maturity are classified as held-to-maturity securities and reported at amortized cost less impairment. (This was your grandfather's GAAP accounting 30 years ago. Everything was at cost less impairment.)
(2)Debt and equity securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities and reported at fair value, with unrealized gains and losses included in earnings.
(3)Debt and equity securities not classified as either held-to-maturity securities or trading securities are classified as available-for-sale securities and reported at fair value, with unrealized gains and losses excluded from earnings and reported in a separate component of shareholders' equity (Other Comprehensive Income).
Most of these securities held by these banks will fall in Category 3 or Category 2. Category 1, buy and hold (i.e. long term investing), is not really part of the training and thinking modern, American corporatist. It's all short-term gains, make a ton of money, send jobs overseas (but keep the labor savings for the executive class) and laugh with your tens (if not hundreds) of millions all the way to an early retirement.
Look at ATT as a classic example. They made $3 billion last quarter. They want to cut more American jobs and send them over-seas. The only thing to be gained is more profit. Which will likely not hit the bottom line as it's eaten up by bonuses for the executives. Just like it almost always is...
Anyway. It is what it is. Going back to the old rules would make these banks look better than the new rules. It might make the stress test easier to accomplish, as you wish. But the test would be far, far less accurate. And the banks would be hiding their problems instead of having them dealt with.
Posted by Moses at May 5, 2009 05:39 AM"That's all head-in-the-sand rationalization because what you want to do is complain instead of thinking the issue through.
You can kiss my tight white ass, Moses. I don't know what a probabilistic/FMV analysis is and I don't want to.
What I want to know is whether someone is bust or not. It is that simple, and if you can't handle that go lie to someone else.
Use fair marketing accounting if you wish. You still can't tell the plain truth, you're worthless.
You're telling me the truth cannot be found. Jesus, talk about a sickening rationalization.
Posted by paradox at May 5, 2009 06:14 AMYou can kiss my tight white ass, Moses.
I certainly hope that didn't cause Moses any emotional pain.
...you're worthless.
I'm sure that did however.
Can we get a ruling from the pain police....oh...nevermind.
Posted by snark at May 5, 2009 06:57 AMThere were the GAP rules. I wonder if our president and his cronies from Goldman Sachs et al. are rewriting them. MATTHEW RICHARDSON and NOURIEL ROUBINI have an article in the WSJ asking how long they can subsidize the banks? My guess would be until the 2012 election. After that, they'll pull the plug. The admin is done running then, it's coast time.
Posted by peter at May 5, 2009 11:11 AMMoses wrote a thoughful informed comment to the post and doesn't really deserve that kind of abuse, para.
Let's not be too absolutely certain about the situation these banks must "clearly" be in. Some are not as hapless as others. The finance, accounting, banking and economic experts seem to be all over the board as far as I can see.
Thanks for your comment, moses.
Posted by euzoius at May 5, 2009 12:07 PMthanks for yet another example of your sour grapes, "I'm a third grader, who wets my pants", "commentary", pete...
You asswipes will never finish throwing a temper tantrum about your "loss", will ya?
Your "lost" election was this country moving on from a chicken shit, revenge based mentality pursued by your hero's, the demented and psychotic, dead eye dick head and his pet chimp...
You remember them right? The assholes who are responsible for allowing 9-11 on their watch, a global economic meltdown, and torturing terrorists they helped create with Gitmo and Abu Ghraib...
Gives total bedwetters like you, pete, to stamp your feet and throw hissy fits while wasting bandwidth....
It's why you are so fondly referred to as shit-fer-brains pete...
Got anymore "insightful analysis" on the banks and economy, shitbrain?
Posted by headxray at May 5, 2009 01:29 PMLooks like "stomp your feet" fits better, but, I'm not as smart as you headcase. Sorry about trying to 'fix' your mess.
Posted by peter at May 5, 2009 01:47 PMOh, my! Will the Sun rise in the East tomorrow morning? I agree with paradox (for the most part).
Also, I think Moses put up a very informative post.
Perhaps, these "stress tests" are associated with some pending legislation and how that legislation may affect the target banks. Recall the S&L "crisis" in the late 1980s early 1990s: most of the S&Ls failed because of a legislative changes. Certainly there were some that were managed in a criminal way, but most became insolvent after the government changed the laws governing the operations of S&Ls.
Regards,
Bagley
Posted by I Agree With Paradox (WTF!) at May 5, 2009 03:00 PMshit-fer-brains pete...the evidence is conclusive:
pukes are only capable of creating messes, not fixing them...
You have no solutions or ideas unless the axiom "greed is good" is valid, or maybe "I've got mine, so fuck you"..Y
You are utterly dishonest, no one believes you are offering "fixes" to anything, unless fix means gloating and getting over..
and another thing asswipe:
the "mess" is of puke origin, since you appear to vote in that direction the "mess" is of your making...leaving you assholes in power only exacerbates the "mess".
Oh you are correct about one thing: you're not very bright..
Accounting is really hard. I tried to take a course in it once. That lasted about two weeks.
I do know that the yield curve is allowing banks to make money hand over fist. And I believe that sometime next year, we'll be informed that the recession ended in the summer of 2009. I don't think the "toxic assets" will turn out to be all that toxic. I think Roubini and Krugman are too pessimistic.
But who knows? In any case, the stress tests won't mean much by Friday night. The economy will keep slogging through the muck -- irregardless!
Posted by Rick at May 5, 2009 03:47 PM