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Posts Tagged ‘relaxation of mark to market accounting’

12th Street Capital Reviews FASB 166 and 167 and Tells Us Why Wall Street Will Need More Capital

Posted by Larry Doyle on November 4th, 2009 12:00 PM |

Money makes the world go round. Right now the world is not going around all that well because there is neither sufficient capital nor sufficient demand for capital from a global standpoint. That said, profits and bonuses are back on Wall Street so they must have sufficient capital, right? Not so fast.

While our wizards in Washington and on Wall Street are projecting an image of ‘come on in, the water’s fine,’ a crowd based in Norwalk, Connecticut has plans that hold major implications for our markets and economy. What crowd is this? The Financial Accounting Standards Board, otherwise known as FASB.

Recall that last spring Congress, supported by a heavy influence from Wall Street, rammed through a relaxation of the FASB’s accounting rule requiring fair value mark-to-market accounting. Regardless of what you think of that  legislation, I think there is no doubt that the change allowed banks to mismark a wide array of assets and forestall losses.  The need for the accounting rule change could be and will be debated ad nauseum. I believe the powers that be at FASB felt emasculated in the process.

Fast forward and let’s review the next major piece of accounting legislation emanating from FASB. That being FASB 166 and 167.  I will admit I am no accountant, but I understand enough about the markets and accounting to know that the implementation of these rules, scheduled to go into effect in January of 2010 (in November 2009 for certain institutions depending on their fiscal calendar), will likely have a major impact on a wide array of financial institutions. (more…)

Market Moving News

Posted by Larry Doyle on April 1st, 2009 10:02 AM |

End of quarter trading is often skewed with many fund managers buying winners and selling losers so as not to have to report those holdings in quarterly reports. Additionally, the market often finds reason to trade up on the last day of a quarter to “put a happy face” on a whining child.

The first day of the new quarter brings us a reversion to previous tough economic news. On the labor front, I commented yesterday in my March 2009 Market Review that a seeming stabilization in the labor market was a positive. That rug got pulled out from under investors this morning. ADP reports that jobless claims are rising from the 650k range to 742k. That 15% increase in projected unemployment is weighing on the market.

Additionally, investors should not view the relaxation of the mark-to-market accounting rule as a positive for the market. The WSJ reports this morning: (more…)






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