If it weren’t for the large non- cash profits on "hard-to-value" holdings, Goldman Sachs (GS) wouldn’t have had much profit last quarter. Lehman Brothers (LEH) would have had significantly less. And Morgan Stanley (MS) wouldn’t have had any.
That’s according to Bloomberg’s Jonathan Weil:
"Here’s Rule No. 1 from Wall Street’s public-relations playbook: If the company you run has big losses on hard-to-value assets, scream your head off about the accounting rules.
And what if the squishy values result in huge gains instead, as they have in the not-so-distant past? Rule No. 2: Stay mum about it for as long as the rules allow.
For months, we’ve seen a growing parade of executives and politicians complain that fair-value accounting rules are to blame for financial institutions’ imploding balance sheets. Even the International Monetary Fund got in on the act in an April 8 report, suggesting the need for "some latitude in the strict application of fair value accounting during stressful events.”
There has been no commensurate outrage about fuzzy mark-to-market accounting that lets companies post unrealized gains on illiquid balance-sheet items."
Go read the full article . . .
Goldman, Morgan Stanley Hit `Level 3′ Jackpot
Bloomberg, April 23 2008