Just when you think there is a glimmer of hope that some of these ne’er do well, lying, cheating, sniveling, cowardly bank CEOs might finally be forced to step up to the confessional and tell all, this comes along: FASB Postpones Off-Balance-Sheet Rule for a Year.
Which makes me wonder: How precarious is the financial health of the US banks and brokers that they need yet another year before they can, oh, I don’t know — disclose what they own on their balance sheets?
"The Financial Accounting Standards Board postponed a measure, opposed by Citigroup Inc. and the securities industry, forcing banks to bring off-balance-sheet assets such as mortgages and credit-card receivables back onto their books.
FASB, the Norwalk, Connecticut-based panel that sets U.S. accounting standards, voted 5-0 today to delay the rule change until fiscal years starting after Nov. 15, 2009. The board needs to give financial institutions more time to prepare for the switch, FASB member Thomas Linsmeier said at a board meeting.
"We need to get a new standard into effect,” Linsmeier said, though “it’s not practical” to begin requiring companies to put assets underlying securitizations onto their books this year.
FASB proposed having companies put new securitization structures on their balance sheets for fiscal years starting after Nov. 15 this year. The Securities Industry and Financial Markets Association and the American Securitization Forum complained that the changes, which could affect as much as $11 trillion of off-balance-sheet entities, may make companies appear short of capital to regulators and lenders. Financial companies’ responses may in turn worsen the credit crisis by further constraining lending and investing, they said."
The longer they wait, the worse it ultimately will be. The long Japanese Recession (1989-2003) was caused by precisely this refusal to take the markdown, and engage in all manner of delays, excuses, procrastinations. Eee-diots — This only will make it worse!
Here’s the money quote:
"Under FASB’s Statement 140, one of the rules the board is
considering changing, the trusts can remain off-balance-sheet if their
activities are "significantly limited” and "entirely specified” in
the legal documents that created them."
Man, if ever a legal clause was made to be folded spindled and mutilated, this was it.
Question: How can anyone value a financial company if they cannot tell what are on their balance sheets?
Answer: You cannot. If you buy a financial under these conditions, you are flying blind.
Investment Thesis: Ritholtz Rule #1: Know What You Own.
Whoever buys Financials under these circumstances loses the right
to whine down the road about companies not being forthcoming. If you
own them, don’t complain when you get what you deserve.
FASB Postpones Off-Balance-Sheet Rule for a Year
Jody Shenn and Ian Katz
Bloomberg, July 30 2008