I know this thread isn't specifically about bullion or precious metals but this is affecting bullion investing. Am I missing something or is it a game of 3 Card Monty? Under the rules of mark to market accounting; Banks recognized large losses in the last quarter of 2008. Caused primarily by the rules of mark to market accounting forcing banks to write down mortgage assets 20 to 30 percent. Last year toxic assets increased 150%. Sounds like a significant increase until you do the math. Under normal circumstances mortgage loans non-performance rate is about 1%. Adding another 150% to that makes a non-performing rate of about 2.5%. So before the financial meltdown mortgage portfolios returned about 6% interest on 99% of assets valued at 100% par. For an effective rate of return of 5.95% - (6% x (99% x 100%))/100% So now these same mortgage portfolios are returning 6% interest on 97.5% of assets valued at 80% par. For an effective rate of return of 7.32% - (6% x (97.5% x 100%)/80% Those big giant losses recognized in 2008 - well they are sitting there waiting to be recognized as big giant gains once the credit market thaws or mark to market rules are modified. Not to mention the 750 billion dollars worth of tarp funds.
You a number farmer? lol. I think that when the housing market turns around and those big giant gains come in, we should get it and not them. With intreset. We can then provide loans to the ones who can't afford to pay back our money. If it goes bad, maybe we can get a bailout from them.
FASB - voting to modify mark to market accounting rules tomorrow. Changes are expected to be applied retroactive to the 1st qtr of 2009. Depending on the modifications - this could produce large gains on many Bank's interim 1st qtr financial statements. Especially those holding large mortgage investment portfolios.
