Banks Find New Ways To.................Bamboozle Investors
Well, the title of the Wall Street Journal article is Banks Find New Ways To Ease Pain of Bad Loans.
The reality is banks are searching for new ways to bamboozle shareholders and society by perpetuating an opaque environment of deception. This will do nothing but lead to more confusion, a greater lack of confidence in financial institutions and ultimately a larger mess. It's really quite sad we can't get honesty into the system.
Wouldn't it be refreshing if all companies would provide a complete and accurate accounting of all bad and potentially bad investments? In detail. Could we get some regulatory leadership? Better yet, could we get some leadership out of the banking community? Confidence in America's capital markets is predicated on transparency more than any other single variable. Confidence in our society is predicated on transparency as well. These institutions are guaranteeing a terrible outcome by their actions. No transparency=>No confidence. Yet, this environment is exactly what the banking industry lobbied to get. Newton's third law of equal but opposite reactions is surely in play here. Banks seek to hinder transparency and oversight and the market responds by collapsing. I'm assuming some transparency will come to pass when the SEC's promise to require full accounting takes effect. Speak of which, SEC Chairman Cox had an article in the Wall Street Journal yesterday. I have reasonable confidence in Chairman Cox. He inherited this crisis and has a history of noble leadership. (This article does not require a subscription.)
The article Banks Find New Ways To Ease Pain of Bad Loans requires a subscription but some key highlights from the article are below.
From lengthening the time it takes to write off troubled mortgages, to parking lousy loans in subsidiaries that don't count toward regulatory capital levels, the creative maneuvers are perfectly legal.
Yet they could deepen suspicion about financial stocks, already suffering from dismal investor sentiment as loan delinquencies balloon and capital levels shrivel with no end in sight.
"Spending all the time gaming the system rather than addressing the problems doesn't reflect well on the institutions," said David Fanger, chief credit officer in the financial-institutions group at Moody's Investors Service, a unit of Moody's Corp. "What this really is about is buying yourself time. ... At the end of the day, the losses are likely to not be that different."
Still, as long as the environment continues to worsen for big and small U.S. banks, more of them are likely to explore such now-you-see-it, now-you-don't strategies to prop up profits and keep antsy regulators off their backs, bankers and lawyers say.
Another eyebrow raiser: switching bank charters so that a lender is scrutinized by a different regulator.
That means the regional bank no longer will be regulated by the Office of the Comptroller of the Currency, which has become increasingly critical of banks such as Colonial with heavy concentrations of loans to finance real-estate construction projects.
The reality is banks are searching for new ways to bamboozle shareholders and society by perpetuating an opaque environment of deception. This will do nothing but lead to more confusion, a greater lack of confidence in financial institutions and ultimately a larger mess. It's really quite sad we can't get honesty into the system.
Wouldn't it be refreshing if all companies would provide a complete and accurate accounting of all bad and potentially bad investments? In detail. Could we get some regulatory leadership? Better yet, could we get some leadership out of the banking community? Confidence in America's capital markets is predicated on transparency more than any other single variable. Confidence in our society is predicated on transparency as well. These institutions are guaranteeing a terrible outcome by their actions. No transparency=>No confidence. Yet, this environment is exactly what the banking industry lobbied to get. Newton's third law of equal but opposite reactions is surely in play here. Banks seek to hinder transparency and oversight and the market responds by collapsing. I'm assuming some transparency will come to pass when the SEC's promise to require full accounting takes effect. Speak of which, SEC Chairman Cox had an article in the Wall Street Journal yesterday. I have reasonable confidence in Chairman Cox. He inherited this crisis and has a history of noble leadership. (This article does not require a subscription.)
The article Banks Find New Ways To Ease Pain of Bad Loans requires a subscription but some key highlights from the article are below.
From lengthening the time it takes to write off troubled mortgages, to parking lousy loans in subsidiaries that don't count toward regulatory capital levels, the creative maneuvers are perfectly legal.
Yet they could deepen suspicion about financial stocks, already suffering from dismal investor sentiment as loan delinquencies balloon and capital levels shrivel with no end in sight.
"Spending all the time gaming the system rather than addressing the problems doesn't reflect well on the institutions," said David Fanger, chief credit officer in the financial-institutions group at Moody's Investors Service, a unit of Moody's Corp. "What this really is about is buying yourself time. ... At the end of the day, the losses are likely to not be that different."
Still, as long as the environment continues to worsen for big and small U.S. banks, more of them are likely to explore such now-you-see-it, now-you-don't strategies to prop up profits and keep antsy regulators off their backs, bankers and lawyers say.
Another eyebrow raiser: switching bank charters so that a lender is scrutinized by a different regulator.
That means the regional bank no longer will be regulated by the Office of the Comptroller of the Currency, which has become increasingly critical of banks such as Colonial with heavy concentrations of loans to finance real-estate construction projects.
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