Only weeks after Tim-the-tax-cheat's “stress test” farce finally concluded, the FASB announced a significant change in its accounting rules. For once, the change is toward more responsible accounting.
The U.S. accounting regulator “sold its soul” a couple of months ago, when it caved-in to bankster demands for “mark-to-fantasy" accounting rules. This allowed much of the U.S. financial crime syndicate to report fantasy “profits”, which, in turn, temporarily prevented the share prices of these fraud-factories from plunging to new lows.
The fraudulent nature of these “profits” was confirmed on Monday, when the Federal Reserve reported that every category of loans in the U.S. (except commercial real estate) were simultaneously at record-rates of delinquencies (see “Loan delinquencies break RECORDS – bankster lies exposed”). Obviously when record numbers of bank customers are not making payments on their loans, it is absurd for banksters to pretend they are making profits.
The “stress test” was further discredited by the absence of any “stress” in the test – as has been observed by many. The economic parameters used were better than the “best-case” scenario for the U.S. economy. Now, this week, we see another flaw in the “stress test” propaganda campaign.
The new FASB accounting changes will force banksters to move roughly $1 trillion in “off balance sheet assets” onto their balance sheets. These “assets” have been hidden off-balance sheet precisely to allow the bankers to avoid write-downs on them, avoid having to increase bank reserves to meet statutory requirements – and avoid putting aside additional loan-loss reserves.
Citigroup (C), alone, is sitting on its own $1 trillion mountain of off-balance sheet feces. This is one of the primary reasons why any pretense by Citigroup that it is financially solvent carries no credence. Not only are the losses on these assets still being hidden years after they occurred, but so are the total amounts of such feces (see “Leverage by the numbers”). Citigroup is one of the only major U.S. banks which fully discloses the quantum (but not the composition) of its off-balance sheet nightmare.
This “ticking bomb” was leveraged by over 30:1 (sector-wide!) at the start of the U.S. financial sector meltdown, and there has been no indication by any U.S. financial institution that they have taken steps to reduce such leverage. Worse, the whole point of creating this “shadow banking system” is that U.S. banks were not required to hold any reserves to “back” these “assets” (let alone loan-loss provisions).
As a quick “refresher” on arithmetic, with 30:1 leverage, a loss on the underlying assets (such as residential U.S. real estate) of just over 3% would take the value of these “assets” down to zero. As we all know, U.S. residential real estate has already plunged by roughly ten times that amount.
Now, about $1 trillion of such feces is being moved onto the bankster balance sheets, with the likelihood being these “assets” have little if any value. The same U.S. propaganda machine which has been “pumping” the U.S. financial sector with one false report after another of not only solvency, but profitability somehow “forgot” to report on these accounting changes – and their impact. Nothing can ruin a good brainwashing campaign more than a few inconvenient facts.
It's hard to conceive of any additional means which the U.S. financial crime syndicate can employ to falsify their accounting any further. Thus, in the real world, where Americans are defaulting on loans at a record rate, these trillions in losses will show up – sooner or later.
More importantly, these fraud-factories cannot be financed by fantasy “profits”. At the very latest, U.S. banksters will be forced to line-up for another round of HUGE hand-outs no later than shortly after they report their 2nd quarter “results” (i.e. lies) – which will likely be more “good news”.
