Update: Hey, Credit Suisse, this ones for you - FAS 167 via FASB's Authoritative Literature and pronouncements. You're welcome. Yup, saw what you did too...

If there are two things I am obsessed about in this world besides caffeine and LOLZ, it would be accounting and the Federal Reserve. The two together = almost too overwhelming to deal with. But I'm a bold sort so I'll try to get through this without skeezing all over myself with excitement. OMG! The Fed and accounting!

From the FRB's website, Federal Reserve responds to new accounting standards:

The Federal Reserve notes the Financial Accounting Standards Board's publication today of Statements of Financial Accounting Standards No. 166 and 167 (FAS 166 and 167), which will have a material effect on banking organizations' accounting for off-balance sheet vehicles. These statements, which become effective in 2010, address weaknesses in accounting and disclosure standards for off-balance sheet vehicles. The new standards amend Statement of Financial Accounting Standards No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (FAS 140), and FASB Interpretation No. 46(R), Consolidation of Variable Interest Entities (FIN 46(R)).

The Federal Reserve is reviewing regulatory capital requirements associated with the adoption of the new accounting standards. In conducting this review, the Federal Reserve is considering a broad range of factors including the maintenance of prudent capital levels, the record of recent bank experiences with off-balance sheet vehicles, and the results of the recent Supervisory Capital Assessment Program (SCAP). As part of the SCAP, participating banking organizations' capital adequacy was assessed using assumptions consistent with standards ultimately included in FAS 166 and FAS 167.

Banking organizations should take into account in their internal capital planning processes the full impact of FAS 166 and 167 and assess whether additional capital may be necessary to support the risks associated with vehicles affected by the new accounting standards.

Now a sane person might wonder why in the hell the Fed would decide to do this knowing how bad off the banks are and that their only saving grace might be the fact that the majority of their toxic assets are off balance sheet, right?

Let's preface this by saying it is our humble opinion that PPIP will never get off the ground. It may, however, slink away and transform into some other set of acronyms with the same boneheaded principles at work. Just sayin.

So maybe THIS has something to do with the Fed's latest boneheaded move? Hmm.

Via Reuters:

Bond giant Pacific Investment Management Co, billionaire Gerald J. Ford and a unit of money manager Legg Mason Inc (LM.N) are eyeing ways to buy up bank's toxic loans, the New York Post said.

Citing people familiar with the matter, the paper said PIMCO, Ford and Legg Mason's Western Asset Management Co are among potential investors.

The investors are considering using a vehicle similar to a real-estate investment trust, which would sell shares to the public and use the proceeds to buy troubled residential mortgages and commercial real estate.

Ford is also considering using a private-equity-like vehicle, the paper said, citing sources, although they warned his plans may not pan out.

Uh huh. So um where did this come from?

It does seem a tad suspicious that the Fed would embrace the FASB change as it defies logic that it would want already sick banks to have to take on more sick assets. But what does logic matter to the Fed?