Totally unfuckingbelievable, really. It’s coming out more every day that over the last ten years arcane financial regulations have been bent, mutilated, or abandoned for the sake of “free market” interests in the investment banking industry. (To what end, we now know!) But now, after all the revelations of the last six months?! Yesterday the Financial Accounting Standards Board— Wall Street retirees and cronies, no doubt— changed a mark-to-market rule so that banks could now determine the value of their assets on their financial statements. The mark-to-market rule required that assets be valued at the price they are worth on the open market— in other words, what people would pay for them. But banks, upset that their assets are being undervalued by the current down market, have won the right to value their own assets according to what they believe they would be worth in more “normal” market times. Gawd, banks, reportedly, already have numerous ways in which to keeps assets and debts off their balance sheets altogether (for what good reasons I do not know) but now they need more ways to make up their own numbers?! This at a time when it is generally recognized (if poorly understood) that the banks were taking wildly leveraged risks, stretching their capital to debt ratios (that’s how much real money they keep ar in case some of their investments/debts go bad) way beyond sound financial practices. And this measure, of course, will only make it more difficult to hold bank risk-taking accountable. ‘Don’t worry,’ says Mr. Banker, ‘we’re capitalized w/ all these valuable assets over here’ (read: that nobody else wants right now but, hey, if we ever really need them to cover our debts taxpayers will pay our prices for them!). See today’s report in the NY Times. Note the subdued yet strained tone, especially in the quotes. Pay attention to it: it means we’ve been screwed again, folks.
(Banks Get New Leeway In Valuing Their Assets)
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