New Accounting Rules for Banks Could Break Them

The IASB and FASB have been working on accounting rules for the “losses” at the banks. Someone is either in for a surprise or somehow the banks will escape the rules. One thing is certain, that the accounting firms that provide the auditing services and certification of the statements of the mega banks are in bind. If they tell the truth, the bank may fail and the firm itself could be sued because it didn’t spot the problems before and report on them. If they lie, which everyone on Wall Street and maybe even in government wants them to do, they are not living up to the standards of their profession. As the truth is unraveled in courts where more and more borrowers are winning cases, both the bank and accounting firms are going to be caught red-faced.
I still want to know how these banks ended up booking unsold mortgage bonds as assets on their balance sheet. Do they expect us to believe that the investment bank actually advanced money for these bonds? The story being peddled on Wall Street and printed by mainstream media is wrong. When will we stop accepting the word of Wall Street leaders who got us into this mess? Remember these are the same bankers who lied to investors, lied to rating agencies, lied to insurers, lied to the their regulators, lied to the federal government and lied to borrowers. It seems to strain all bounds of reason to actually think that that they are suddenly telling the truth now.
Either investors bought mortgage backed certificates (bogus or not) or they did not. If they did, that money was used to fund mortgage closings downstream and it was used as the personal piggy bank of each investment firm. It follows inevitably to say that the banks were not funding the loans and hence had no risks of default. Yet they claimed the losses anyway.
They used investor money that was supposed to go to funding mortgages to gamble on the quality of the mortgage bonds hoping and making sure they could pull the rug out from under the same people they had sold the certificates. And they made sure that even the best tranche was saddled with making good on the worst tranche so that even those loans would be declared in default for purposes of collecting the insurance that should have gone to the investors, the credit default swap proceeds that should have gone to investors and the taxpayer and Federal reserve bailouts that should have gone to investors.
The creditors, i.e., the actual lenders in the loan transactions, were denied disclosure and payment of money received by their agents on Wall Street who “helped” them buy these bogus mortgage backed certificates. The banks claimed the losses that the investors eventually bore, when they knew they were getting the insurance and bailout money. They should have given the money to  investors and refunded the money that was based upon pure lies. The mortgage assets they carry on their balance sheets are also lies in large measure. You simply cannot convince me or any reasonable person that in the waning days of the mortgage meltdown, when everyone knew this scheme was crashing, that these very smart investment bankers starting buying the mortgage bonds themselves.
In this sense, the investment bankers and the investors must be considered as one entity or at least principal and agent. The money was received, it should have been booked as loss mitigation for the investors and that would have reduced the receivable on the books of the investors. Several investor groups have sued the banks saying as much. And those cases are being settled which means we know that the receivables of the lender-investors has been reduced or eliminated.
Once the receivable is reduced — for any reason relating to payment received in money — the payable must be correspondingly reduced, which means the homeowner doesn’t owe as much as he thinks nor as much as the parties claiming foreclosure. Remember, homeowners didn’t crate this false securitization scheme that covered up a simple PONZI scheme. It was the bankers who did this, seeking windfall. That part of the windfall will now start falling in the homeowners’ direction is simply turnabout is fair play.

This was all passed off as bad judgment — description that is insulting. This was intentional. Wall Street is all about making the money off of other people’s money. And that is exactly what they did. And now they are screwing the investors, screwing the taxpayers, screwing the borrowers and taking the homes too. This goes beyond unfair; it is theft.

New loan loss rules expected early next year

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