Banking and Credit: It Is NOT Over ~ Karl Denninger 8/11/2009

peaceandlove · 08-12-2009, 03:21 AM

Banking and Credit: It Is NOT Over

Tuesday, August 11. 2009
Posted by Karl Denninger

Gee, more truth-telling this morning! http://finance.yahoo.com/news/Watchd...&asset=&ccode=

In its latest assessment of the $700 billion financial system bailout, the Congressional Oversight Panel warns that banks still hold many risky loans of uncertain value. If unemployment rises sharply or the commercial real estate market collapses -- as many economists fear -- the banking system could again lose its footing, the panel says in a report to be released Tuesday.

"Uncertain value"?

Oh do come on.

Let's look at the actual information that the COP put out, minus the usual media spin job: http://cop.senate.gov/press/releases...9-troubled.cfm

The Panel's report raises several questions about the program, including whether accounting rules that allow banks to carry assets at higher valuations will diminish their willingness to sell.

English: We still have banks that are engaged in what amounts to accounting fraud when looked at through any sort of objective lens, but its all "ok" because we have "accounting rules" that say you can claim something is worth more than it really is.

For smaller banks, those not among the 19 stress tested bank holding companies, troubled assets pose special challenges that have not been acknowledged. These banks' troubled assets are generally whole loans, which are not currently being addressed by Treasury's PPIP program. These banks also hold greater concentrations of commercial real estate loans, which pose a threat of high defaults.

English: Intentionally-overstated valuations on paper is more important when you're smaller and have more concentration of trash, especially when that concentration is in the sector where almost no recognition of true value (commercial real estate) has yet taken place. Bluntly: These banks are screwed (Guaranty, Corus and Colonial are just a few examples.)

Treasury and relevant government agencies should move toward greater disclosure of the terms and volume of troubled assets on banks' balance sheets. Because banks typically disclose few details about the toxic assets on their books, it is difficult to gauge the magnitude of the risk that these assets pose to the financial system.

English: Treasury, including the OTS and OCC, are willfully and intentionally allowing banks to issue overly-rosy statements and valuations, and are permitting the hiding of losses. Oh, The Fed is too - let's not forget them.

Continues: http://market-ticker.denninger.net/a...-NOT-Over.html

08-12-2009, 03:21 AM	#1
peaceandlove Avalon Senior Member Join Date: Sep 2008 Location: Turtle Island Posts: 2,776	Banking and Credit: It Is NOT Over ~ Karl Denninger 8/11/2009 Banking and Credit: It Is NOT Over Tuesday, August 11. 2009 Posted by Karl Denninger Gee, more truth-telling this morning! http://finance.yahoo.com/news/Watchd...&asset=&ccode= In its latest assessment of the $700 billion financial system bailout, the Congressional Oversight Panel warns that banks still hold many risky loans of uncertain value. If unemployment rises sharply or the commercial real estate market collapses -- as many economists fear -- the banking system could again lose its footing, the panel says in a report to be released Tuesday. "Uncertain value"? Oh do come on. Let's look at the actual information that the COP put out, minus the usual media spin job: http://cop.senate.gov/press/releases...9-troubled.cfm The Panel's report raises several questions about the program, including whether accounting rules that allow banks to carry assets at higher valuations will diminish their willingness to sell. English: We still have banks that are engaged in what amounts to accounting fraud when looked at through any sort of objective lens, but its all "ok" because we have "accounting rules" that say you can claim something is worth more than it really is. For smaller banks, those not among the 19 stress tested bank holding companies, troubled assets pose special challenges that have not been acknowledged. These banks' troubled assets are generally whole loans, which are not currently being addressed by Treasury's PPIP program. These banks also hold greater concentrations of commercial real estate loans, which pose a threat of high defaults. English: Intentionally-overstated valuations on paper is more important when you're smaller and have more concentration of trash, especially when that concentration is in the sector where almost no recognition of true value (commercial real estate) has yet taken place. Bluntly: These banks are screwed (Guaranty, Corus and Colonial are just a few examples.) Treasury and relevant government agencies should move toward greater disclosure of the terms and volume of troubled assets on banks' balance sheets. Because banks typically disclose few details about the toxic assets on their books, it is difficult to gauge the magnitude of the risk that these assets pose to the financial system. English: Treasury, including the OTS and OCC, are willfully and intentionally allowing banks to issue overly-rosy statements and valuations, and are permitting the hiding of losses. Oh, The Fed is too - let's not forget them. Continues: http://market-ticker.denninger.net/a...-NOT-Over.html