The Market Ticker
by: Karl Denninger
The banks are still carrying these "assets" at well-above their actual market value. This means their balance sheets are showing them to be healthier than they really are.
The Government, which claimed it was going to "drain the swamp" and get the market moving again, tried everything short of the barrel of an M-16 in the mouth of people like Blankfein and Pandit, but couldn't get them to sell.
But rather than force the recognition of market prices on the balance sheets, which would force these banks to either sell or be FDIC'd (incidentally, the only correct pair of options the banks should have) the government instead is allowing the banks to continue to lie about the market value of these "assets" and carry them above what the market will pay - that is, they are allowing the continuing intentional distortion of so-called "book value", reserve ratios and soundness
Of course this isn't how the government banking cartel (the same so-called "regulators" that allowed and even encouraged book-cooking when it came to reserves and deposits) sees it:
F.D.I.C. officials portrayed the change as a sign that banks were returning to health on their own.
Baloney. If the banks were returning to health on their own they wouldn't care if the market price was recognized on their balance sheets.
The FDIC is lying.
But some analysts said the banks’ reluctance to clean up their balance sheets meant they were merely postponing their day of reckoning. Indeed, some analysts said government policies had made it easier for banks to gloss over their bad loans.
"Gloss over" is another fancy word for fraudulent accounting practices, all made "legitimate" by our government.
No one knows exactly how many losses are buried in the troubled mortgages on banks’ books, but some analysts estimate that the unrecognized losses total more than $1 trillion. Under accounting rules, banks do not have to write down the value of most mortgages unless they sell them or they fall delinquent.
And, as Wells Fargo did last year, they can change the rules on when something is "delinquent"! That is, it can be 30 days behind today, 60 tomorrow, and three years next week. That's all ok, according to our so-called "regulators."
The Federal Reserve also is pumping hundreds of billions of dollars into mortgage-backed securities, and into other kinds of consumer and business lending. Starting next month, the Fed plans to offer cheap financing for investors who want to buy “legacy” securities backed by mortgages on commercial real estate.
Of course this simply means that the Federal Reserve (that is, you) will eat the loss.
