Monday, March 16, 2009

Peter Wallison, Advocate

"In fact, neither of these statements is likely to be true. Both taxpayers and banks could come out well-and so would our economy--if the government were to buy the assets at their 'net realizable value,' which is based on an assessment of their current cash flows, discounted by their expected credit losses over time. ... This is simply what the value of the cash flows would bring in a fully functioning market, including discounts for several factors like anticipated future losses. ... Thus, under mark-to-market rules, the banks must discount their assets' net realizable value. ... A hint of the true situation was contained in a remark by Vikram Pandit, the CEO of Citibank, in testimony before the House Financial Services Committee last week. He noted that Citi marks to market and that 'those marks are reflected in the losses we've taken, as well as in our income statements and balance sheets.' ... In other words, Citi has marked some assets below their net realizable value, and selling them at a price lower than that value would be unfair to its shareholders. ... The banks have already made an assessment of the assets' net realizable values, as Mr. Pandit suggests was done at Citi. The government can quickly verify the accuracy of these valuations, including the rates used for discounting, and can of course come up with its lower evaluation if it disagrees. ... But the key benefit is the boost in the banks' capital which comes from a sale now. This would eliminate doubts about banks' solvency and free up their ablity and willingness to lend again. If this is a win-win for the banks and the government, why is it that no one had thought about doing this before? ... This has run into opposition from the accounting industry and investors groups, who are afraid it will be a license for banks to manipulate their financial statements", my emphasis, Peter Wallison (PW) at the WSJ, 26 February 2009.

This is so bad. What does PW, AB, JD Harvard, think MLEC was if not an earlier attempt to have Uncle Sam overpay banks for junk assets? See my 18 October 2007 post: http://skepticaltexascpa.blogspot.com/2007/10/use-your-own-money.html. Yes, PW wants to give banks a license to produce phony financials. Why listen to PW? We've heard these arguments before. As for Citigroup, did you notice Citi has a $44 billion deferred tax asset on its 31 December 2008 balance sheet? KPMG did not insist it be written off. KPMG did not insert a "going concern" comment in its opinion. KPMG had no problems with Citi's internal controls. Didn't Citi add $49 billion in SIVs to its balance sheet 15 months ago, my 15 December 2007 post: http://skepticaltexascpa.blogspot.com/2007/12/citigroup-comes-clean.html.

What is "a fully functioning market" anyway? If Citi has any assets which Pandit thinks are undervalued, he should buy them for his own account. Or shut up. Why should anyone care about the banks assessment of anything? Would Citi be with us today sans $350 billion in federal money? The "government can quickly verify" what? Arithmetic, not value. Which by the way, is what much of Big 87654 auditing is, just checking arithmetic.

3 comments:

Anonymous said...

I'm praying for the Sherron Watkins of Citi to emerge... or AIG ...

Someone who has direct knowledge of the books being cooked...

MLEC... silly caca... Paulson will be disgraced for his complicity in protecting Government Sachs ...

Thoreau said...

Why should Madoff be incarcerated and the nationally renowned tax shelter crusader Mike Hamersley, of the California Franchise Tax Board, remain free? Madoff merely engaged in a time tested simple transparent scam and unlike the current Treasury Secretary, Geithner and Mike Hamersley apparently did not cheat on his taxes. Hamersely continues to purvey a scam so diabolical and a scam which has destroyed so many families’ lives that he is allowed to hold a high level job in the Government confiscating earnings from honest citizens who unlike Mike Hamersley did not lie to the Senate or the IRS about taxes. Hamersely told the Senate tax fraud was hiding the true facts from the IRS and engaging in paper transactions. Emails show Hamersley purveyed tax shelters for KPMG which resulted in tens of millions of tax fraud based on Hamersely’s definition of tax fraud to the Senate which hit the trifecta, sham paper losses, lying to the IRS, use of sham foreign companies and back dating (according to Hamersley’s definition of backdating). Why shouldn’t Bernie be free if the government not only allows Hamersely to be free but continue his charade on behalf of the Government? Why should Bernie Madoff be in the pen while KPMG remains a going concern and not indicted for its part in the greatest ponzi scheme in history which has resulted in a $50 Trillion destruction of world wealth? KPMG audits many of financial institutions which were the purveyors of this ponzi scheme. KPMG received 100s of millions in fees from these institutions to sign off on the fraudulent financials (check out Citi’s level three assets and the 100s of billions of exposure it has to bad debts or Citi’s $32 Trillion of derivative ticking time bombs). Madoff is nothing compared to KPMG and at least apparently Madoff paid his taxes. KPMG engages in massive tax fraud with its fraudulent foreign Bermuda captive sham foreign insurance company, Park, where not only does KPMG cheat on its own taxes but cheats its partners through contrived reinsurance arrangements devised by the good KPMG soldier, Claudia Taft. Why does everyone hate Madoff but not KPMG, Madoff’s crimes are simple and a drop in the bucket compared to the malfeasance purveyed by KPMG.

LATXMAN said...

Thoureau, Whistlewhat, numerous other blogger alias (all of which are David Greenberg, the former KPMG tax shelter promoter):

David, what are you going to do when Hamersley finds out that it is you who have been posting all of these false, delusional, and defamatory statements about him just like the ones you have been posting under a number of other aliases on other blogs? It shouldn't take him too long since you are saying exactly the same things about me and other former KPMGers in emails and in telephone conversations. Taking shots at others does not diminish the magnitude of one's dastardly deeds.