[Cashmere]

The board that sets accounting rules for U.S. corporations yesterday postponed by a year a plan that could require banks and other financial services companies to raise mountains of new capital to protect themselves against financial exposures not currently reflected on their balance sheets.

In essence, the new rule would have forced banks to admit that much of the CDO paper and other nuclear waste they are holding have very little value. Then, of course, the banks would have reserve/asset ratios that were unacceptable, and re-capitizalization (take loans) or bankruptcy would result.

What were they thinking! Put off for a year?

Who are the suckers here? Linky Linky

[jbrovont]

Two things pop out at me here. They pushed it back at least a year, into "someone else's presidency." If the whole economy blows up, someone else will get "blamed."

Among those pushing for the delay, were Citigroup and The Federal Reserve. Citigroup on behalf of 7000 institutions, and the Fed supposedly for FNM/FM.

That looks to me like a defacto admission from these organizations "If we had to cover our liabilities we would not be able to raise enough capital."

[Twilight]

This delays the restoration of confidence.

It's the chicken and the egg, isn't it? They complain that "in the current environment of tight credit and depressed share prices for financial companies, raising capital can be costly and difficult and can dilute the value of existing shareholders' stock," yet the cost of funding is so high in large part because they are deceitful obfuscators. Judging by the stories about LIBOR, they don't even trust each other behind closed doors. Most of them would have little difficulty raising cash if we knew the approximate size of the hole they were planning to fill in, or at least an upper and lower bound based on a reasonable comparison with past experience, and a published business plan for moving on. Then we would all know that these guys are going to stick around and be open for business, and the market likes a company with the past behind it and prospects looking forward. As for those with lethal exposure to bad debt, what justification is there for them to be allowed to raise capital on false pretences? The cavalier attitude that "we are dead, but we are going to hit you up for cash every month in the hope you don't keep count" is precisely why the entire sector's relationship with all stakeholders has been poisoned.

To me this looks like the regulators are saying they will look away and count to a hundred before checking the money, and anything goes so long as they hear no gunshots.

Well f*** me.