It's scary as hell, but the left feels very abandoned by the President. I'm not even that far left and I feel abandoned by the President. He's basically spent three years telling everyone who voted for him that he doesn't care about them while he's trying to win favor with the Republicans. They will never like him and he has to wake up right now and see that or he's out.
I think a lot of the middle of this country sees him as ineffective as a leader and when times are tough I those voters will vote for a change. Sadly that change ends up being Perry who will be made out by Fox to be a sort of middle of the road, economic champion, who doesn't take crap off no body. Since most people in this country only pay attention to what's happening for about five minutes before they vote they'll vote for him.
Sad but true.
Our financial system is crumbling this week.
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IMADreamer
- Has an anecdote about a townie he overheard.
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Joe Shlabotnik
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Re: Our financial system is crumbling this week.
This. And crap like letting Boehner push him around on his jobs speech this week. Give me a break. And surrounding himself with the same banker friends as the last administration. The corruption is complete.IMADreamer wrote:It's scary as hell, but the left feels very abandoned by the President. I'm not even that far left and I feel abandoned by the President.
Right now, I am either sitting out or protest voting for the nuttiest candidate out there. I am ready to watch it burn.
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cards2468
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Re: Our financial system is crumbling this week.
You still could let your voice be heard when primaries reach you.Joe Shlabotnik wrote:This. And crap like letting Boehner push him around on his jobs speech this week. Give me a break. And surrounding himself with the same banker friends as the last administration. The corruption is complete.IMADreamer wrote:It's scary as hell, but the left feels very abandoned by the President. I'm not even that far left and I feel abandoned by the President.
Right now, I am either sitting out or protest voting for the nuttiest candidate out there. I am ready to watch it burn.
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TimeForGuinness
- Hall Of Famer
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Re: Our financial system is crumbling this week.
++cards2468 wrote:You still could let your voice be heard when primaries reach you.Joe Shlabotnik wrote:This. And crap like letting Boehner push him around on his jobs speech this week. Give me a break. And surrounding himself with the same banker friends as the last administration. The corruption is complete.IMADreamer wrote:It's scary as hell, but the left feels very abandoned by the President. I'm not even that far left and I feel abandoned by the President.
Right now, I am either sitting out or protest voting for the nuttiest candidate out there. I am ready to watch it burn.
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Hungary Jack
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Re: Our financial system is crumbling this week.
Sorry Slide, but I am not familiar with the case. The company is obviously being reorganized, and so there is some investor expectation that a financial restructuring and an effective business plan will make the stock worth something again. With the love that banks get from Congress, and the shakeout that has already occurred, Wamu might be worth a flyer to rebound.slide_into_first wrote:Has anyone (HJ?) been following the Washington Mutual bankruptcy case? The stock rallied from 4 cents to 24 cents 3 months ago around the time the judge ruled the company did not have to reimburse the Home Savings retirement plan $69 million, since then the stock has drifted back to 7-8 cents. Apparently a ruling is due soon on whether hedge funds that were given a seat at the negotiation table were guilty of insider trading. What could make the common stock have any value more than 7-8 cents? Would anybody in their right mind buy the stock? What would make the stock valuable, what would make it worthless (compared to now)?
The latest 8-K shows $6.7B in assets and $8.4B in liabilities. There is a lot of debt on the BS, so a debt restructuring might help save the stock.
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planet planet
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Re: Our financial system is crumbling this week.
Has anyone read any Thomas Friedman books? I saw him on Meet the Press this morning and fervently agreed with his positions. I saw he wrote "The World is Flat" in 2004 and has "That Used to Be Us" coming out this month.
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slide_into_first
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Re: Our financial system is crumbling this week.
http://accountingonion.typepad.com/thea ... rmers.html
FAS 141(R): Turning Toxic Loans into Star Performers*
From a MoneyNews.com story published this Wednesday headlined "Banks Stand to Reap Billions from Purchased Bad Loans," came an account of a jaw-dropping transaction. It was spawned by FAS 141(R), the latest and greatest standard on accounting for business combinations:
"When JPMorgan bought WaMu out of receivership last September, it used the purchase accounting rule [FAS 141(R)] to record impaired loans at fair value, marking down 118.2 billion of assets by 25 percent.
Now, JPMorgan says its first-quarter gains from the WaMu loans resulted in $1.26 billion in interest income and left the bank within an accretable-yield balance that could result in additional income of $29.1 billion."
Business combination accounting has forever been fertile ground for earnings and balance sheet management for one simple reason: the opportunity to tweak the amounts reported for the assets acquired and liabilities assumed, with the ultimate objective of brightening post-acquisition earnings reports. But, as tiresome as that old game might be, the kind of maneuver that JPMorgan's management has engineered is a novel twist on an old loophole that had once been closed pretty tightly by the SEC.
The Closed Loophole that Would Be Re-Opened by the FASB
Once the "pooling of interests" method of business combination accounting of APB 16 was abolished with the advent of FAS 141 (not to be confused with FAS 141(R)), the most basic surviving principle of business combination accounting became thus: the acquisition of a business should always be reflected on the financial statements of the acquiror by assigning a new carrying amount to each of the acquired company's assets and liabilities. This new carrying amount would be updated, based on current assumptions and estimates regarding the future role of the acquired assets and liabilities in the combined entity. The implementation of this principle had long been known as the "purchase accounting" method for business combinations.
With certain important exceptions, SFAS 141 mandated that new carrying amounts for assets acquired in a business combinations would be based on their fair values. The exception that is germane to the JPMorgan story pertains to loans (i.e., trade receivables, interest-bearing loans and marketable debt securities classified as held-to-maturity). The measurement bases for these items were carried forward from APB 16's version of the purchase accounting method: a gross amount reduced by an appropriate allowance for uncollectible accounts. This exception to loan measurement was important, because it also meant that a 1986 SEC staff position would still be applicable to purchase accounting.
At that time, the SEC saw fit to put a stop to unwarranted increases in the allowance for loan losses as part of the business combination transaction. Increases to loan loss allowances would mathematically transfer future loan losses to goodwill, where they would be deferred indefinitely, with the effect of reporting inflated earnings in future periods as the loans were eventually settled for more than their understated carrying amounts. Staff Accounting Bulletin 61 (Topic 2-A(5)) states that the SEC would not permit any adjustments of the acquiree's estimate of loan loss reserves, unless the acquiror's plans for ultimate recovery of the loans were demonstrably different from the plans that had served as the basis for the acquiree's estimates of the loss reserves.
FASB Amnesia?
FAS 141(R) did away with the "purchase method" and established the "acquisition method" of accounting for business combinations. It apparently did so out of a belief that measurements of assets and liabilities that are based on the most current information available are usually, if not always, preferable to valuations based on less-current information. The JPMorgan case glaringly points to a significant flaw in that belief: inconsistent application of fair value could be more harmful than consistent application of a less desirable attribute. As to the case at hand:
WaMu, as is quite common, accounted for its loans based on a held-to-maturity model. That is, except for recognizing declines in creditworthiness, the loan carrying amount is based on the original contractual terms; interest is accrued by multiplying the net carrying amount by the yield to maturity as of the date the loan was originated/acquired.
Even though the market value of these loans had declined significantly as they turned toxic, WaMu apparently was not required to record losses to bring the loans down to their fair values.
JPMorgan, when acquiring WaMu, was required by FAS 141(R) to mark the loans to market. Subsequent accounting by JPMorgan will continue the WaMu the held-to-maturity model.
It would be a pretty safe bet that JPMorgan was very 'conservative' in their estimates of fair value for the loans; that's because the lower the fair value, the higher the yield to maturity, and the higher the amount of reported future earnings. Of course, there are some limits to JPMorgan's estimate of fair value: auditor pushback, SEC review, increased risk of goodwill impairment charges, and capital adequacy regulations. But, at least in this case, it is possible to become rich without being greedy.
Where is the SEC!?
Maybe there has been more coverage of this issue, but I haven't seen it; kudos to its author, Julie Crawshaw of Newsmax. If we are concerned that bank executives are being overcompensated, especially on the taxpayers' dime, here is a prime example of where insufficient oversight has spawned a new source of moral hazard.
For starters, the SEC should put a stop to this obvious and blatant abuse, immediately. They should issue another SAB, carving out the offending provision of FAS 141(R) and restoring the long-established and functioning status quo. Every company that benefitted from the ill-conceived accounting rule should be forced to retroactively restate their earnings – especially any financial institution on the government dole.
Perhaps the lack of permanent leadership in the Commission's Office of the Chief Accountant is contributing to a lack of attention to this obvious problem, but it is in no way an excuse. Also, this is a problem created by the FASB. Let's be charitable and call it an unintended consequence, but whatever the cause, the FASB should move to fix it forthwith. I'm suggesting that the SEC should act first, solely because they have the demonstrated capability of being able to move the fastest. That's because a SAB doesn't have to be exposed for comment before it can be issued.
But, lacking any actions by either the FASB or SEC to put the cat back in the bag, auditors (perhaps via the PCAOB), and boards should be put on notice of a new potential scheme to inflate executive compensation in the absence of actual value creation for stakeholders. If a single dime of executive compensation comes out of accreted excess earnings from these business combination games, I hope that private securities lawyers will round up the proxies and the lawsuits, settling for nothing less than "a pound of flesh."
A larger lesson is important to briefly discuss in order to understand how this kind of loophole can occur: in accounting for financial assets, the only workable system is comprehensive mark-to-market, all of the time. The current situation is a consequence (intended or otherwise) of the piecemeal approach pursued by the FASB (and IASB) towards fair value accounting.
FAS 141(R): Turning Toxic Loans into Star Performers*
From a MoneyNews.com story published this Wednesday headlined "Banks Stand to Reap Billions from Purchased Bad Loans," came an account of a jaw-dropping transaction. It was spawned by FAS 141(R), the latest and greatest standard on accounting for business combinations:
"When JPMorgan bought WaMu out of receivership last September, it used the purchase accounting rule [FAS 141(R)] to record impaired loans at fair value, marking down 118.2 billion of assets by 25 percent.
Now, JPMorgan says its first-quarter gains from the WaMu loans resulted in $1.26 billion in interest income and left the bank within an accretable-yield balance that could result in additional income of $29.1 billion."
Business combination accounting has forever been fertile ground for earnings and balance sheet management for one simple reason: the opportunity to tweak the amounts reported for the assets acquired and liabilities assumed, with the ultimate objective of brightening post-acquisition earnings reports. But, as tiresome as that old game might be, the kind of maneuver that JPMorgan's management has engineered is a novel twist on an old loophole that had once been closed pretty tightly by the SEC.
The Closed Loophole that Would Be Re-Opened by the FASB
Once the "pooling of interests" method of business combination accounting of APB 16 was abolished with the advent of FAS 141 (not to be confused with FAS 141(R)), the most basic surviving principle of business combination accounting became thus: the acquisition of a business should always be reflected on the financial statements of the acquiror by assigning a new carrying amount to each of the acquired company's assets and liabilities. This new carrying amount would be updated, based on current assumptions and estimates regarding the future role of the acquired assets and liabilities in the combined entity. The implementation of this principle had long been known as the "purchase accounting" method for business combinations.
With certain important exceptions, SFAS 141 mandated that new carrying amounts for assets acquired in a business combinations would be based on their fair values. The exception that is germane to the JPMorgan story pertains to loans (i.e., trade receivables, interest-bearing loans and marketable debt securities classified as held-to-maturity). The measurement bases for these items were carried forward from APB 16's version of the purchase accounting method: a gross amount reduced by an appropriate allowance for uncollectible accounts. This exception to loan measurement was important, because it also meant that a 1986 SEC staff position would still be applicable to purchase accounting.
At that time, the SEC saw fit to put a stop to unwarranted increases in the allowance for loan losses as part of the business combination transaction. Increases to loan loss allowances would mathematically transfer future loan losses to goodwill, where they would be deferred indefinitely, with the effect of reporting inflated earnings in future periods as the loans were eventually settled for more than their understated carrying amounts. Staff Accounting Bulletin 61 (Topic 2-A(5)) states that the SEC would not permit any adjustments of the acquiree's estimate of loan loss reserves, unless the acquiror's plans for ultimate recovery of the loans were demonstrably different from the plans that had served as the basis for the acquiree's estimates of the loss reserves.
FASB Amnesia?
FAS 141(R) did away with the "purchase method" and established the "acquisition method" of accounting for business combinations. It apparently did so out of a belief that measurements of assets and liabilities that are based on the most current information available are usually, if not always, preferable to valuations based on less-current information. The JPMorgan case glaringly points to a significant flaw in that belief: inconsistent application of fair value could be more harmful than consistent application of a less desirable attribute. As to the case at hand:
WaMu, as is quite common, accounted for its loans based on a held-to-maturity model. That is, except for recognizing declines in creditworthiness, the loan carrying amount is based on the original contractual terms; interest is accrued by multiplying the net carrying amount by the yield to maturity as of the date the loan was originated/acquired.
Even though the market value of these loans had declined significantly as they turned toxic, WaMu apparently was not required to record losses to bring the loans down to their fair values.
JPMorgan, when acquiring WaMu, was required by FAS 141(R) to mark the loans to market. Subsequent accounting by JPMorgan will continue the WaMu the held-to-maturity model.
It would be a pretty safe bet that JPMorgan was very 'conservative' in their estimates of fair value for the loans; that's because the lower the fair value, the higher the yield to maturity, and the higher the amount of reported future earnings. Of course, there are some limits to JPMorgan's estimate of fair value: auditor pushback, SEC review, increased risk of goodwill impairment charges, and capital adequacy regulations. But, at least in this case, it is possible to become rich without being greedy.
Where is the SEC!?
Maybe there has been more coverage of this issue, but I haven't seen it; kudos to its author, Julie Crawshaw of Newsmax. If we are concerned that bank executives are being overcompensated, especially on the taxpayers' dime, here is a prime example of where insufficient oversight has spawned a new source of moral hazard.
For starters, the SEC should put a stop to this obvious and blatant abuse, immediately. They should issue another SAB, carving out the offending provision of FAS 141(R) and restoring the long-established and functioning status quo. Every company that benefitted from the ill-conceived accounting rule should be forced to retroactively restate their earnings – especially any financial institution on the government dole.
Perhaps the lack of permanent leadership in the Commission's Office of the Chief Accountant is contributing to a lack of attention to this obvious problem, but it is in no way an excuse. Also, this is a problem created by the FASB. Let's be charitable and call it an unintended consequence, but whatever the cause, the FASB should move to fix it forthwith. I'm suggesting that the SEC should act first, solely because they have the demonstrated capability of being able to move the fastest. That's because a SAB doesn't have to be exposed for comment before it can be issued.
But, lacking any actions by either the FASB or SEC to put the cat back in the bag, auditors (perhaps via the PCAOB), and boards should be put on notice of a new potential scheme to inflate executive compensation in the absence of actual value creation for stakeholders. If a single dime of executive compensation comes out of accreted excess earnings from these business combination games, I hope that private securities lawyers will round up the proxies and the lawsuits, settling for nothing less than "a pound of flesh."
A larger lesson is important to briefly discuss in order to understand how this kind of loophole can occur: in accounting for financial assets, the only workable system is comprehensive mark-to-market, all of the time. The current situation is a consequence (intended or otherwise) of the piecemeal approach pursued by the FASB (and IASB) towards fair value accounting.
-
slide_into_first
- is unaware that dangerous is the real Tyler Durden
- Posts: 14433
- Joined: June 10 09, 11:31 pm
- Location: In Chula Vista hanging with the Surenos
Re: Our financial system is crumbling this week.
I'm not advising anyone buy this and I don't own it, I just think it's funny how much interest there is by investors and lottery pick players.
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JackofDiamonds
- Bringer of Boston Baked Blue Balls
- Posts: 15010
- Joined: April 16 06, 9:15 pm
Re: Our financial system is crumbling this week.
I've read his last three (are there more?) and thought that Hot Flat and Crowded was on point. I've been reading his editorial for years, and it's much more hit or miss, but his books have been stellar.planet pujolsian wrote:Has anyone read any Thomas Friedman books? I saw him on Meet the Press this morning and fervently agreed with his positions. I saw he wrote "The World is Flat" in 2004 and has "That Used to Be Us" coming out this month.
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slide_into_first
- is unaware that dangerous is the real Tyler Durden
- Posts: 14433
- Joined: June 10 09, 11:31 pm
- Location: In Chula Vista hanging with the Surenos
Re: Our financial system is crumbling this week.
http://seekingalpha.com/article/292094- ... rth-a-lookslide_into_first wrote:Optical network stocks have been stronger than the general market- Ciena, Finisar, JDS Uniphase, Oclaro. Infinera a little weak today compared to the others.