Mark to Market relaxed

Today President Obama hailed agreements at the emergency meeting of world powers Thursday as a "turning point in our pursuit of global economic recovery."

Balderdash! Here is the turning point in American, and therefore global economic recovery:

The changes to so-called mark-to-market accounting allow companies to use “significant” judgment when gauging the price of some investments on their books, including mortgage-backed securities. Analysts say the measure may reduce banks’ writedowns and boost their first-quarter net income by 20 percent or more. FASB voted 3-2 to approve the rules at a meeting today in Norwalk, Connecticut.

(...)

Companies weighed down by mortgage-backed securities, such as New York-based Citigroup, could cut their losses by 50 percent to 70 percent, said Richard Dietrich, an accounting professor at Ohio State University in Columbus.

So there you have it. A 20 percent boost in first-quarter net income and losses cut by more than half with the stroke of a pen! (By a 3-2 margin, mind you.) But every silver lining has a cloud. The geniuses at FASB are letting companies back date the new rule for first quarter reporting, but not for 2008 year-end.

FASB rejected requests from banks to let them apply the fair-value change to their year-end financial statements for 2008. While the new standard takes effect for earnings reports filed at the end of June, FASB said companies could apply it to their first-quarter financial statements.

Can't have too much of a good thing, I suppose. Or perhaps they just want the 2008 "Bush era" data to look as bad as possible going forward.

Economics and Markets Obama Administration Posted by JohnGalt at April 2, 2009 2:57 PM