Monday, March 01, 2010

TARP Didn't Save Banks - FASB Did, a Mark-to-Market Saga

I've written a lot about Mark-to-Market, in fact I stated the events in the above chart about a year ago, you can see my writings here. I am no expert in Mark-to-Market accounting but what is clear to me is that TARP had almost no real affect on the markets, it was this accounting rule change. Had it not been made the market would not be where it is today and TARP would have needed a bailout - though perhaps we would actually be dealing with our problems. Since FASB changed the rules we are now on a pretend and extend saga that looks like it has no ending. Banks can pay record bonuses while not paying back other government provided liquidity facilities and while they continue to hold assets on their balance sheets that are not worth near what they say.

Welcome to the accounting bailout - now if Greece could just figure out a way to do something similar!

Scott Dauenhauer CFP, MSFP, AIF