Thursday, November 19, 2009

More Bad Bank Accounting

"Federal bank regulators issued guidelines allowing banks to keep loans on their books as 'performing' even if the value of the underlying properties have fallen below the loan amount. ... Regulators said that the rules were designed to encourage banks to restructure mortgages with borrowers rather than foreclose on them. But the move has prompted criticism that regulators are simply prolonging the financial crisis by not forcing borrowers and lenders to confront, rather than delay, inevitable problems. The guidelines, released on Friday by agencies including the [FDIC], the [Fed] and the Office of the Comptroller of the Currency, provide guidance for bank examiners and financial institutions working with commercial property owners who are 'experiencing diminished operating cash flows, or prolonged delays in selling or renting commercial properties.' Restructurings are often in the best interest of both lenders and borrowers, the guidelines point out", Lingling Wei at the WSJ, 31 October 2009, link:

More crap from Uncle Sam. If a restructuring makes sense, no matter what the accounting, do it. See my 17 July 2008 post: This is an accounting issue. Well PCAOB, SEC, Big 87654? Where are you on this?

1 comment:

Anonymous said...

We are in the "Great Deflation".