Mark to market?

[somdrenter]

But the recent strength seen in bank earnings didn't come from significant improvements in their core businesses. Instead, accounting maneuvers helped bolster bottom lines.

Some banks reduced the amount of money they set aside to cover loan losses, which some analysts say conflicts with the reality of deteriorating loan portfolios. That means if the economy doesn't recover and troubled assets continue to rise, in coming quarters banks might have to boost loss reserves again — which could hurt future earnings.

So nothing has changed other than accounting practices…..Why the need for the billions in bailouts?? Just cook the books until you “realize” gains, no bailout needed.

[Tilted]

Originally Posted by somdrenter

So nothing has changed other than accounting practices…..Why the need for the billions in bailouts?? Just cook the books until you “realize” gains, no bailout needed.

The specific 'accounting maneuver' that the author of that piece referred to was a marking-to-market. (Just of liabilities, instead of assets - if one believes in the notion that things should be marked-to-market, then it's pretty unreasonable to argue that it is only appropriate when it hurts a banks balance sheet, and not when it helps it.) It was not something new that they were able to do because of the FASB changes with regard to mark-to-market.

Citigroup in specific, which they referred to, issued a statement after the changes were announced stating unequivocally that the new rules would not affect their accounting at all.

[somdrenter]

Originally Posted by Tilted

The specific 'accounting maneuver' that the author of that piece referred to was a marking-to-market.

Some banks reduced the amount of money they set aside to cover loan losses, which some analysts say conflicts with the reality of deteriorating loan portfolios.