Now It's the Banks' Turn to Bend Over. Or Just Bend the Rules.

Saturday, January 16, 2010 , , , , , 0 Comments

Hahahahahaha. Surely you've heard by now that Obama is trying to punish the big TARP banks though I wouldn't really say that is the goal. Many of his targets have actually paid back the money (some in the hopes of getting away with massive bonuses, of course, but ignore that, it's not the important issue) but that doesn't seem to matter.

Less than 2 years ago, we were rushing to save them. Now we're trying to milk all of the bazillions we can out of it.

I'm not saying outrage is wrong. I'm saying in this particular case it's not payback, it's called "the administration trying to pay its bills and using outrage towards banks to advance that goal" duh.


Showing little sympathy for critics of his proposed fee on big financial institutions, President Barack Obama vowed to recover all the cash taxpayers spent on the Troubled Asset Relief Program, saying he won't let Wall Street "take the money and run."

In his weekly radio address Saturday, Mr. Obama said the large banks that are gearing up to dole out billions in bonuses can afford to pay his planned "financial crisis responsibility fee," which is designed to generate $90 billion over 10 years.

"Like clockwork, the banks and politicians who curry their favor are already trying to stop this fee from going into effect," Mr. Obama said. "The very same firms reaping billions of dollars in profits, and reportedly handing out more money in bonuses and compensation than ever before in history, are now pleading poverty."

"It's a sight to see."

The proposed tax, which must be okayed by Congress, has triggered stiff opposition from the banking sector. Opponents say it will hinder banks' ability to lend and unfairly saddle Wall Street with the cost of the auto-sector bailout. Many banks would be hit by the fee, even though they have already repaid their TARP funds.

It wasn't a good week to be a banker with Obama coming from one side and the FDIC attacking from the other.

Let's not forget FAS 166/167 (or whatever codification calls them these days) that will force many of the free-wheeling, hedonistic banks to bring many of their exotic financial instrument liabilities on sheet where they should have been all along. Of course, you already know that Alan Greenspan really cheerleaded this magic trick for bank balance sheets back in the day when he was still heading up the Fed. Now the Fed claims it supports FASB's decision but that's likely because they are hoping no one will notice they themselves were the ones who insisted they stay off of there in the first place.

Just my guess but what do I know?

It's cool, the FDIC issued guidance on how banks can avoid higher capital requirements as a result by bending the rules. Of course.


The board of directors at the Federal Deposit Insurance Corp. on Wednesday finalized a new capital rule that addresses industry concerns raised by Financial Accounting Standards (FAS) 166 and 167. FAS 166 and 167, which take effect in January, will require financial institutions to bring certain securitized assets onto balance sheets.

The industry for months has said these accounting changes will adversely affect institutions’ ability to securitize, as risk-based capital requirements would force these firms to allocate a substantial amount of capital essentially overnight. In her monthly Kitchen Sink column for the January issue of HousingWire magazine, Linda Lowell gives a review of regulatory issues raised by 166 and 167 and other unforeseen consequences of the rule change.

In it, Lowell comments: “The proposed rule also would expand regulators’ authority to require banks to include in risk based capital (RBC), commensurate with the actual risk relationship, the assets of SPEs and VIEs that they sponsored but do not have to consolidate under GAAP.”

“Clearly regulators are certain that FAS 167 might not return a securitization to its sponsor’s balance sheet,” Lowell adds. “They also recognized that future securitizations could specifically be designed to evade consolidation.” The FDIC answered the industry’s calls for capital relief Wednesday with the final rule, which provides an optional delay and phase-in for up to one year for the effect on risk-based capital and the allowance for lease and loan losses related to assets affected by FAS 166 and 167.

Naturally! Foiled again FASB, now what?

Jr Deputy Accountant

Some say he’s half man half fish, others say he’s more of a seventy/thirty split. Either way he’s a fishy bastard.