Yes, the new mark-to-accounting ruling is simply ludicrous for it allows the US Banks to hide their toxic waste!!!
Soros Says New Mark-to-Market Rules Keep ‘Zombie’ Banks Alive
- By Saijel Kishan and Kathleen Hays
April 6 (Bloomberg) -- Billionaire George Soros said the change to fair-value accounting rules will keep troubled banks in business, stalling a recovery of the U.S. economy.
“This is part of the muddling through scenario where we are going to keep zombie banks alive,” Soros, 78, said today in an interview with Bloomberg Television. “It’s going to sap the energies of the economy.”
The Financial Accounting Standards Board last week relaxed so-called mark-to-market rules, allowing banks to use “significant” judgment in gauging prices of some investments on their books. While analysts said the measure may reduce writedowns and boost net income, investor advocates and accounting-industry groups said it will help financial institutions hide their true health.
Soros said that banking system is “seriously under water” with banks on “life support.” U.S. stocks fell for the first time in five days today on concern that government measures to shore up banks may not help as much as expected and loan losses will exceed levels from the Great Depression.
“They are weighed down by a lot of bad assets, which are still declining in value,” he said. “The amount is difficult to estimate, but I think it’s in the region of maybe a trillion- and-a-half dollars.”
Soros said there is a risk the U.S. economy will fall into a depression if nations don’t act collectively to solve the economic crisis.
Multilateral Response
“As long as we deal with this in a multilateral and more or less coordinated way, I think we’ll get through,” he said.
Hungarian-born Soros gained fame in the 1990s when he broke the Bank of England’s defense of the pound and drove the currency from Europe’s system of linked exchange rates. He also successfully bet that Germany’s mark would rise after the collapse of the Berlin Wall in 1989 and Japanese stocks would start to fall in the same year.
Soros’s New York-based firm oversees $21 billion. Its Quantum Endowment Fund returned 8 percent in 2008. That compared with an average loss of 19 percent by hedge funds, according to data compiled by Hedge Fund Research Inc. of Chicago.
Soros was ranked as last year’s fourth-highest paid hedge fund manager with about $1.1 billion, according to Institutional Investor’s Alpha magazine.
'Seriously under water'! Some would prefer the word insolvent!
On CNBC, Meredith made the following comments that Banks' 1st-Quarter Results May Show Improvement
- Bank earnings may show some improvement in the first quarter, though the sector still has far to go in recovering from the credit crisis, well-known analyst Meredith Whitney told CNBC.
"I think you’ll see a directional turn," Whitney said in a live interview. "Banks will make a little money, as little as a penny a share, but they won’t lose money."
For that reason, she said investors should be careful shorting—or betting on further declines—in bank stocks right now.
"Lay off on shorts, and don’t buy into selloffs," Whitney said. "The fundamentals are not getting any better but capital ratios should get better."
Whitney, a former analyst at Oppenheimer who has her own firm, is renowned for calling out the problems with banks' toxic assets before the issue became widespread.
Whitney said the banks should be seeing some benefits from the revised mark-to market rules in the first quarter.
She also said she expected home prices to fall another 30 percent, contrary to some predictions that housing may have bottomed.
"Home prices cannot bottom while liquidity is still contracting from the economy," she said. She did say that large banks should benefit from low mortgage rates and refinancing.
Asked about comments from another well-known bank analyst, Michael Mayo, who said earlier Monday that banks' debt problems are far from over, Whitney said: "I think that’s out there. There’s nothing out there that would cause anyone to believe they’d be different ... but tangible ratios could be better."
Mayo is former Deutsche Bank analyst who now works for CLSA's Calyon Securities, remains negative on the sector. His comments sent most bank stocks lower on Monday, which helped pull the overall market down.
Whitney also said that JP Morgan Chase [JPM 28.20 -1.08 (-3.69%) ] booking a profit in the 4th quarter should not be viewed as a bottom for the financials.
Whitney did say that she thought that the upcoming stress tests by the government for the banks could mean a grim time for the financials at the end of April, when the tests are concluded.
"After stress tests come out, you’ll see some banks that didn’t pass," said Whitney. "I don’t think we get out of the woods until mid 2010, but that doesn’t mean you can’t find a trading opportunity."
Among the other points Whitney made in the interview:
1. Peak to trough levels for home prices will be over 50 percent
2. Liquidity continues to be drained from the system
3. More consumers become stressed and unable to service debt burdens.
No comments:
Post a Comment