Posts filed under “Mathematics”

FASB Discovers Own Cojones

Make that belatedly.

America’s previously neutered accountants — traditionally, green-visored chickenshit-cowards who have rolled over for their belly rubs from America’s CEOs and CFOs, giving them all of the bullshit they asked for over the past 2 decades — seem to be developing a spine of sorts.

Recall that in the midst of the credit crisis, the Accounting Standards Board were knuckled under by Congress. FASB now seems to be regretting their act of political cowardice. Here’s Jonathan Weil:

“Turns out America’s accounting poobahs have some fight in them after all. Call them crazy, or maybe just brave. The Financial Accounting Standards Board is girding for another brawl with the banking industry over mark-to-market accounting. And this time, it’s the FASB that has come out swinging.

It was only last April that the FASB caved to congressional pressure by passing emergency rule changes so that banks and insurance companies could keep long-term losses from crummy debt securities off their income statements.

Now the FASB says it may expand the use of fair-market values on corporate income statements and balance sheets in ways it never has before. Even loans would have to be carried on the balance sheet at fair value, under a preliminary decision reached July 15. The board might decide whether to issue a formal proposal on the matter as soon as next month.”

The mere fact these gutless wonders are even considering Fair Value accounting is a massive improvement. If the lobbyists and bought & paid for Congress don’t interfere, we may actually expect to see significant changes:

“The scope of the FASB’s initiative, which has received almost no attention in the press, is massive. All financial assets would have to be recorded at fair value on the balance sheet each quarter, under the board’s tentative plan.

This would mean an end to asset classifications such as held for investment, held to maturity and held for sale, along with their differing balance-sheet treatments. Most loans, for example, probably would be presented on the balance sheet at cost, with a line item below showing accumulated change in fair value, and then a net fair-value figure below that. For lenders, rule changes could mean faster recognition of loan losses, resulting in lower earnings and book values.

The board said financial instruments on the liabilities side of the balance sheet also would have to be recorded at fair-market values, though there could be exceptions for a company’s own debt or a bank’s customer deposits.”

That is a huge correction to a previous outrage.

Remember, mark to market accounting hasn’t caused these problems — It merely exposed them to bank investors.

>

Previously:
How Congress Betrayed Investors to Help Banks (April 3, 2009)

http://www.ritholtz.com/blog/2009/06/how-congress-betrayed-investors/

CDS/FASB (April 2nd, 2009)

http://www.ritholtz.com/blog/2009/04/cdsfasb/

What Does the FASB Proposal Mean for Financials? Evolution or Revolution? (March 18th 2009)

http://www.ritholtz.com/blog/2009/03/what-does-the-fasb-decision-mean-for-financials-evolution-or-revolution/

Sources:
Accountants Gain Courage to Stand Up to Bankers
Jonathan Weil
Bloomberg, July 23 2009

http://www.bloomberg.com/apps/news?pid=20601039&sid=a5BsXz90CMso

FASB Grows A Pair? Watch Those Stocks!
Karl Denniger
Market Ticker, July 23. 2009

http://market-ticker.denninger.net/archives/1255-FASB-Grows-A-Pair-Watch-Those-Stocks!.html

Category: Earnings, Mathematics, Regulation

Overstating Bailout Costs

“The total potential federal government support could reach up to $23.7 trillion.” -Neil Barofsky > Yesterday, we noted that the 23 Trillion dollar bailout was a “WTF number.” The statement above really turns on your definition of the word “Support” — this is not the actual costs, but more of a measure of the total…Read More

Category: Bailouts, Mathematics

750 Million Albums is an Off The Wall Number

No, Michael Jackson did not sell 750 million albums. A funny thing happened to Michael Jackson’s sales figures over the past few years: They seemed to have more than tripled: “In the last three years of his life, long after the release of his final original album, Michael Jackson’s career album sales took a curious…Read More

Category: Mathematics, Music

SEC’s Shapiro: Ratings Agencies Need Supervision

Encouraging comments from SEC chair Mary Schapiro: “The Securities and Exchange Commission has created a new group of examiners to oversee credit rating agencies, which came under sharp criticism for their role during the financial crisis. The SEC has already adopted a number of measures to increase transparency at credit rating agencies, which are paid…Read More

Category: Bailouts, Earnings, Mathematics

Why Should You Care If Economists Raise U.S. Outlook ?

Look, let’s not beat around the bush: Wall Street economists, as a group, well, they suck. Most of them did not see the crisis coming; many were deep in denial about the recession long after it started. They missed the housing boom and bust, the credit crisis. They continued to see phantom bottoms and false…Read More

Category: Economy, Mathematics, Psychology

Bill Miller is Back? Hardly.

There has been a lot of recent chatter along the lines of Bill Miller is back in the WSJ, Investor’s Business Daily, Bloomberg, etc. This turns out to be a simple case of bad mathematical analysis — like declaring Fannie Mae (FNM), AIG or Citibank (C) buy & hold owners were back because they were…Read More

Category: Investing, Mathematics

Deeply Oversold Bounce, Not Green Shoots

Michael (Jeff Goldblum): I don’t know anyone who could get through the day without two or three juicy rationalizations. They’re more important than sex. Sam (Tom Berenger): Ah, come on. Nothing’s more important than sex. Michael: Oh yeah? Ever gone a week without a rationalization? -The Big Chill > You can never underestimate the absurdity…Read More

Category: Employment, Mathematics, Psychology

Black Swan: We’re in the Middle of a Crash

Category: Bailouts, Mathematics, Video

Gödel, Escher, Bach: A Mental Space Odyssey

In college, I was pretty blown away by this book. So when I stumbled across the MIT openware course on Douglas Hofstadter’s Pulitzer Prize winner, Godel, Escher, Bach: An Eternal Golden Braid, I just had to share it: Here’s the MIT course description: What do one mathematician, one artist, and one musician all have in…Read More

Category: Mathematics

Good/Surprising/Stunning Housing News

The good news is that Housing Starts and Building Permits each increased for the month of May. And in a statistical shocker, the monthly gains for May 2009 were (surprisingly) greater than the margin of error for both Starts at 17.2% (±14.4%) and Permits at 4.0% (±1.7%) over April. The stunning news was the 45.2%…Read More

Category: Mathematics, Real Estate