Now that the FASB accounting change is official giving banks more leeway in pricing hard to value assets, the CDS of the big banks are narrowing after yesterday’s record high wides.

-Citi is in about 40 bps but is just back to where it was on Tuesday.
-BAC is lower by 50 bps
-WFC is lower by 30 bps
-JPM is lower by 15 bps, all back to one week lows.
-MS and GS are each in about 30 bps.

The question for bank stocks as we enter the afternoon is whether they can hold their mark to market euphoria or will they be a sell on the news into the close. Altering the rules may help them from a capital ratio standpoint but it doesn’t change the issues facing the housing market or the consumer.

What will be interesting however is if the banks feel like they need to hold less capital based on where certain assets are now priced, will they be even more inclined to quickly give back our TARP money and get out from underneath the persecution of Congress?

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