FASB: Taxpayers Should Feed Banks More (Pt. 2)

But that’s not all

(This concludes my look at what the FASB has done. CLICK HERE if you missed the opening)…

The FASB is also going to allow companies to list impaired assets like mortgage securities in their books as “other comprehensive income.” This improves operating income by allowing companies to report smaller loss amounts on their financials. So long as the company discloses quarterly their justification for listing assets in this category, it will be considered appropriate.

Columbia Business School Accounting Professor Robert Willens sees this new provision upping companies’ earning statements by 20 percent on average. Yet large banks like Citigroup Inc. would sop up much of this revaluation profits because they are carrying much many more toxic assets than smaller banks.

And bankers want even more

Bankers are also lobbying for the FASB and the SEC to receive retroactive compensation for their impaired illiquid assets. House Financial Services Committee Chairman Barney Frank told the American Bankers Association he will present their proposal to the SEC and Congress. However, Willens finds the idea very unusual.

“FASB doesn’t traditionally do that, but Frank’s pressure could make it happen,” he said.

What does this mean to taxpayers?

The prognosis isn’t good. Looking at the responses to the article, “JoeHunt” provides a good yardstick:

Honestly, how can anyone believe this rubbish? Show me a strong, dependable cash flow and I’ll show you a market and investors willing to pay market value for the discounted cash flow. In this market especially, I’d dump my entire portfolio into something with a dependable cash flow. WAKE UP folks, the problem is these future cash flows are “pie in the sky” or the actual dependable cash flow is way under book value, so the assets do not exist at these prices and that’s why there’s an illiquid market, the lapse of mark to market is an utter robbery. ... click here to read the rest of the article titled "FASB: Taxpayers Should Feed Banks More (Pt. 2)"