BoA Discloses $44 Billion Unrealized Loss...

[Sam Spade]

Oh, and also...

Citibank: Carrying loans on book at $660.9 billion; 10K filed today discloses that "fair value" is $642.7 billion - an "unrealized loss" of $18.2 billion dollars.

http://idea.sec.gov/Archives/edgar/data/831001/000119312509041237/d10k.htm

Wells Fargo: Carrying on book at $843.8 billion; "fair value" of $829.6 billion, an "unrealized loss" of $14 billion.

http://idea.sec.gov/Archives/edgar/data/72971/000095013409003967/f51597e10vk.htm

Of course, the "on book" losses don't include all the garbage "off book".  (tee-hee)

When State Street pulled this crap back in January on a Friday evening, its stock declined 50% the following Monday...

How stupid do they think we are?  Obviously, we know that our government is stupid, but still...
http://www.bloomberg.com/apps/news?pid=20601087&sid=aax9SfdVNbiE&refer=home

Bank of America Loans Valued at $44 Billion Less Than Books Say

By David Mildenberg

Feb. 27 (Bloomberg) -- Bank of America Corp.’s loans are valued at $44.6 billion less than what its balance sheet says, according to the bank’s annual report released today.

Bank of America said that its loans have an estimated fair value of $841.6 billion, while the carrying amount of the loans is $886.2 billion.

“It’s an academic exercise that reflects the liquidity discount that is severe these days,” said bank spokesman Scott Silvestri. “These are loans that are not held for sale and we intend to hold them to maturity.”

Loan values have slumped as more borrowers have missed payments on their credit card, home and other types of loans and investor demand for mortgage-based securities has dried up.

Bank of America reported total shareholders’ equity of $177.1 billion as of Dec. 31, according to the regulatory filing issued after the close of trading today.

“That’s the heart of why these companies are trading where they are,” Friedman Billings Ramsey & Co. analyst Scott Valentin said in an interview. “Technically, if you mark-to- market the entire balance sheet, most of these banks are insolvent.”

The Financial Accounting Standards Board, the private group that oversees accounting rules, passed a rule in 1991 to require that companies disclose at least once a year the “fair value” of all their financial instruments, including those they carry on their balance sheets at historical cost.

Bank of America reported total shareholders’ equity of $177.1 billion as of Dec. 31, according to the regulatory filing issued after the close of trading today.

The Charlotte, North Carolina lender’s shares declined 26 percent after the U.S. government’s third attempt to rescue Citigroup Inc. raised concerns that other banks may also need help. Bank of America lost $1.37 to $3.95 at 4:15 p.m. in New York Stock Exchange composite trading.

[Swing low, sweet chariot. Comin' for to carry me home.]

that's why MTM accounting rules setup after Enron are extremely dumb...it doesn't allow companies to hold and ride out tough markets, rather it forces them to liquidate when values are lowest.

[Beet]

In other words, the banks have already failed all their "stress tests." This is the problem with trying to address a problem whose accounting scope is inherently amorphous and constantly changing.

[Lunar]

too soon?

[Beet]

Banks --> Real Economy --> Banks --> Real Economy is a never ending cycle. If it continues like this, we will spiral into oblivion. The entire economy will shut down. When this happened in Asia in 1997, Russia in 1998, Argentina in 2001, the economies eventually devalued their currencies and relied on exports fed by external demand. They didn't need their own financial institutions or capital markets because they could use foreign investment. The world economy was still there. Now there isn't.

Funny thing though, after reading and watching tons of experts from all sides of the economic spectrum for the last several months, I have not heard a single one propose a workable solution that would prevent the spiral into oblivion.

But the government doesn't have the luxury of merely commentating, they must act-- unfortunately, they won't have the authority to act radically until the problem has become so bad that the costs of doing so come down more-- or at least that's how they probably think. Personally, I'm not too convinced the hesitation is appropriate.