"Mark to Market"

Changes Make Same Old Banks Look Better

Posted on Sunday, June 7, 2009

Let's not forget that you can play with numbers to make them appear just about any way you want. Congress recently revised the requirement mark to market accounting rules (see other blog entries for more explanations). Without even discussing the merits of mark to market and whether thise rules do more harm than good, lets just all remember that this one move has added millions, sometimes billions to bank balance sheets overnight. And lets not forget that the truth behind the new numbers is EXACTLY the same as it was behind the old, less desireable numbers. The reality has not changed.

Talk about perception. Problems go away, literally with the strike of a pen…or do they? The hope is that a better perception will lead to more investor confidence and eventually a better reality.

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The problem is that while the banks may "look better" to the bean counters and regulators, they look horrific to the customer. Credit is essentially on lockdown, with banks not taking balance transfers on credit cards, not writing mortgages and almost literally hiding from customers wanting a refinance or restructuring of debt. The bank customers now distrust the banks to an incredible degree. I actually heard a saleslady at a store that sells to the "youth market" say that the young were still able to buy because they did not have "liabilities like houses and stocks"! Imagine, investments in stocks and houses is now considered "liabliities" by the people down at street level! Could anyone have imagined such a thing in the late 1990's? We are now becoming used to a mentality of failure and collapse, and forget how far we have fallen and how fast :-( The lack of trust is terrible, and as Warren Buffett once said, “Trust is like oxygen. When it’s there, you don’t notice, but when it’s gone”…, everything suffocates. What you call “the great do-over” in a presentation you gave in Ft. Lauderdale that was aired on C-SPAN2 book TV is simply not going to happen, at least not until cash is freed up. The banks have sucked up any excess liquidity and immediately locked it down, making the TARP and recovery efforts both under Bush and Obama a complete failure.

Roger Conner Jr 6/16/2009
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