Do you think its possible that lawmakers passed the no-M2M law because they knew that there wasn’t enough TARP money to cover the losses of banks at the end of this quarter? I see this as incredibly negative and i announce that i will never be long a u.s. bank stock until M2M is reinstated. What incentive do I have to own a bank that could very well be bankrupt before I buy it?
MattLikesAnalysis Wrote: ------------------------------------------------------- > Do you think its possible that lawmakers passed > the no-M2M law because they knew that there wasn’t > enough TARP money to cover the losses of banks at > the end of this quarter? > > I see this as incredibly negative and i announce > that i will never be long a u.s. bank stock until > M2M is reinstated. What incentive do I have to own > a bank that could very well be bankrupt before I > buy it? I agree with you that FASB made a big mistake by changing the rule on M2M. If the assets can be classified as held-to-maturity then there was no problem in the first place as they were not required to mark them to market. If they were for trading, then they have to recognize the loss. Changing the rules will not make a losing position a winner overnight, what a joke.
The goal of PPIP (which is essentially the original TARP) was to remove the toxic assets from bank’s balance sheets. Nobody from private community showed interest in picking up trash assets from the banks. So what’s left to do to prevent consistent write downs? Just change m2m rules!
My theory is that banks and bankers are a very influnetial powerful group. If you let bad things happen to them, bad things happen in the market. So everyone is trying to make them happy.