Bloomberg reports that FASB is likely to vote soon to require banks to own up to the vast bucks not currently on their balance sheets:
“The Financial Accounting Standards Board will approve rules on off-balance-sheet accounting by June, forcing banks to add billions of dollars of assets to their books, Chairman Robert Herz said. Rules that let companies keep assets and liabilities including mortgages and credit-card receivables off their balance sheets “were stretched,” Herz said today at an accounting conference at Baruch College in New York. The changes would take effect next year, he said.”
Noah Rosenblatt at UrbanDigs.com wants us to remember that as much or more than $5.2 trillion in assets are not on banks’ balance sheets, but rather, hidden in so called Special Purpose Entities (QSPE) and Variable Interest Entities (VIE).
“I believe Citigroup has about $1.1 Trillion in off-balance sheet assets as of late 2008. Who knows what the other megabanks have off balance sheet now that the toxic assets belonging to CountryWide, Wachovia, WaMu, Merrill Lynch, etc..have been merged with the acquiring holding company? FASB announced last June that it was delaying the vote on ‘off-balance’ sheet change for a year – after much opposition from Citigroup and other megabanks. Well, time is almost up.”
Rolfe Winkler points out FASB’s change will increase banks reported leverage and asks the question that inquiring minds everywhere want to know and that may make the stress test meaningful…or not:
“This will increase banks’ tangible assets by a large amount. That’s the numerator in the TCE calculation. Are bank examiners taking account of this during the stress tests?”
After all, the stress tests ARE supposed to be looking forward- right? Swamp Report thinks this FASB change will be ignored in the announcement s of Stress Test results on May 7th. But telling the world there’s no problem with banks and then admitting that assets have been allowed off-balance sheet due to the bankster lobby but which should have been on-balance sheet all along, will damage their credibility. As bank analyst Nancy Bush posts, after an inital market pop, the market will recognize papered over problems for what they are.
