It is better to be an outcast, a stranger in one’s own country, than an outcast from one’s self. It is better to see what is about to befall us and to resist than to retreat into the fantasies embraced by a nation of the blind.
Chris Hedges

Friday, April 03, 2009

G20 Capitulates to the bankers and shows US how to fudge the books

Two major decisions at the G20 conference locks in any doubt that governments worldwide have capitulated to the bankers.

First, the G20 have agreed to adopt International Accounting standards when banks issue reports. US accounting standards are much more strict; a protection for investors and a bulwark against the prevalence of lawsuits in the US, arising from misleading bank reports. This article, published last year in the Washington Post, shows how these standards allowed European banks to bilk investors. In short, International accounting standards allow banks to shift losses to another place in time. This means that when the expected bear rally fizzles in October, the collapse will be compounded by unreported losses floating their way back to the top at some time in the future.

The second move was to shift away from Mark to Market. This will permit US banks to backdate the value of the derivatives they are holding to the date they were purchased, not on their value today. One can only wonder how this will affect the outcome of Geithner's PPIP plan to purchase the toxic assets that has frozen the banks. Banks are afraid of exposing their assets in today's market because it will prove they are insolvent. Getting rid of Mark to Market will permit the banks to substitute bad assets for good cash... all at the expense of the taxpayer.

All this has done has moved back the day of reckoning. There has to be losers somewhere in the mix, but these two moves forestalls the collapse and does nothing to solve the problem.

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