Time to buy banks with mark-to-market behind them?
Time to buy banks with mark-to-market behind them?
All kidding aside, those of you that follow my articles know that I do tend to lean toward a stricter form of accounting (not only for businesses, but for individuals as well). Make sure to check out my past articles on this topic Mark to Market and Is Your Home and Asset?
I want to review “mark to market” to make it crystal clear exactly what “mark to market” accounting is: “Mark” as to mark with a pencil in an accounting ledger, “to” the “Market” price. Market price representing that an asset is only worth what the market says it is worth.
“Mark to market” is just a stricter form of accounting!
Think of like a car that you have had for 8-9 years that has never let you down. It’s never broken down. It has been great… but you are just tired of looking at it and crave something new. You know it has never broken down and therefore worth more to you then what anyone will give you for it in the used car market.
Unfortunately the market price will not take into account the fact that it has never broken down and it will generally just be priced similar to any other car like it.
“Mark to market” is no different. Nobody wants the toxic assets (bad mortgages) on the banks books, but they are not all toxic. In fact, there have been some banks that have never written a sub-prime mortgage, and have gone through all the proper procedures of writing a mortgage for their clients.
Regardless, a lot of these banks have fallen victim to the prejudice surrounding all these mortgages on the banks books. Remember, 90% of the people are still making their mortgage payments.
The easing of these rules allows banks to value these assets, based upon income and not just what a buyer is willing to pay.
The really interesting thing that comes into play here is the fact that we may be seeing the first sign of Washington starting to do too much. This easing of “mark to market” has a direct link to the recently announced TALF program.
TALF is (The Federal Reserve's Term Asset-Backed Securities Loan Facility) program where the Fed will lend money to investors and buy these assets off the banks’ books. But the price just went up, because of the new accounting standard and therefore it makes these mortgage assets more expensive and of more value to the bank.
In fact, the banks may no longer want to sell them! It will be interesting to see how all this shakes out.
This creates more uncertainty surrounding these assets, and the TALF program. Just a reminder to the interested TALF investors… that the rules of the game are a moving target.
Make certain to check out our courses to have a better understanding of investments. They are incredibly affordable with a money back guarantee! (No questions asked)
Sincerely,
Bob O’Brien
Sr. Instructor
My Wealth
Time to buy banks with marktomarket behind them - To learn more about this author, visit Bob O'Brien's Website.
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Yesterday, the FASB (Financial Accounting Standard Board) caved into pressures from Wall Street and Washington, and said that it is OK for the banks to start cookin’ the books again! Did anyone really think the “bean counters” would take a real stand on something?
All kidding aside, those of you that follow my articles know that I do tend to lean toward a stricter form of accounting (not only for businesses, but for individuals as well). Make sure to check out my past articles on this topic Mark to Market and Is Your Home and Asset?
I want to review “mark to market” to make it crystal clear exactly what “mark to market” accounting is: “Mark” as to mark with a pencil in an accounting ledger, “to” the “Market” price. Market price representing that an asset is only worth what the market says it is worth.
“Mark to market” is just a stricter form of accounting!
Think of like a car that you have had for 8-9 years that has never let you down. It’s never broken down. It has been great… but you are just tired of looking at it and crave something new. You know it has never broken down and therefore worth more to you then what anyone will give you for it in the used car market.
Unfortunately the market price will not take into account the fact that it has never broken down and it will generally just be priced similar to any other car like it.
“Mark to market” is no different. Nobody wants the toxic assets (bad mortgages) on the banks books, but they are not all toxic. In fact, there have been some banks that have never written a sub-prime mortgage, and have gone through all the proper procedures of writing a mortgage for their clients.
Regardless, a lot of these banks have fallen victim to the prejudice surrounding all these mortgages on the banks books. Remember, 90% of the people are still making their mortgage payments.
The easing of these rules allows banks to value these assets, based upon income and not just what a buyer is willing to pay.
The really interesting thing that comes into play here is the fact that we may be seeing the first sign of Washington starting to do too much. This easing of “mark to market” has a direct link to the recently announced TALF program.
TALF is (The Federal Reserve's Term Asset-Backed Securities Loan Facility) program where the Fed will lend money to investors and buy these assets off the banks’ books. But the price just went up, because of the new accounting standard and therefore it makes these mortgage assets more expensive and of more value to the bank.
In fact, the banks may no longer want to sell them! It will be interesting to see how all this shakes out.
This creates more uncertainty surrounding these assets, and the TALF program. Just a reminder to the interested TALF investors… that the rules of the game are a moving target.
Make certain to check out our courses to have a better understanding of investments. They are incredibly affordable with a money back guarantee! (No questions asked)
Sincerely,
Bob O’Brien
Sr. Instructor
My Wealth
Time to buy banks with marktomarket behind them - To learn more about this author, visit Bob O'Brien's Website.
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John PowerJohn Power, founder of Biltmore Franchise Consulting, has extensive experience developing and marketing franchises and business opportunities. He has been in and around franchising for over twenty years. From 1980 through 1990 he conceptualized, organized, and developed the American Video Association. He grew AVA to 2,000 national members, before selling the company it 1990. It was later merged into another home video marketing company. From 2000 to 2005 he worked as a contract marketing and human resources consultant to several local and national companies. In 2005 Mr. Power began working as a franchise development consultant on a full-time basis. Since that time he has helped more than three dozen companies initiate and develop their franchising program. He notes that there are many companies interested in developing a franchise program, and who need his specialized assistance. Mr. Power is a “hands-on” franchise consultant. He said, “I am the ‘nuts and bolts’ person who tends to the details for my clients.” Mr. Power holds a B.S. degree with a major in Marketing. See: www.biltmorefranchise.com You may contact Mr. Power at: jpower@biltmorefranchise.co - Visit John Power's Website |
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