Old Coach

Banking on Wachovia As a Bailout Trade

Not so fast. The bailout bill has a provision where Cox can suspend mark to market accounting rules (See below). And also commissions a study on its effects. If that rule gets suspended, look for the 3-year rolling average to come out of the study as the long-term solution. Newt Gingrich and others have been pushing Congress to consider it. Take out M to M and sell the bad debts to Uncle Sam and WB starts looking really good for the long haul or to command a much higher price as a takeover.

SEC. 132. AUTHORITY TO SUSPEND MARK-TO-MARKET AC-
COUNTING.
(a) AUTHORITY.—The Securities and Exchange Com-
mission shall have the authority under the securities laws
(as such term is defined in section 3(a)(47) of the Securi-
ties Exchange Act of 1934 (15 U.S.C. 78c(a)(47)) to sus-
pend, by rule, regulation, or order, the application of
Statement Number 157 of the Financial Accounting
Standards Board for any issuer (as such term is defined
in section 3(a)(8) of such Act) or with respect to any class
or category of transaction if the Commission determines
that is necessary or appropriate in the public interest and
is consistent with the protection of investors.


SEC. 133. STUDY ON MARK-TO-MARKET ACCOUNTING.
(a) STUDY.—The Securities and Exchange Commis-
sion, in consultation with the Board and the Secretary,
shall conduct a study on mark-to-market accounting
standards as provided in Statement Number 157 of the
Financial Accounting Standards Board, as such standards
are applicable to financial institutions, including deposi-
tory institutions. Such a study shall consider at a min-
imum—
(1) the effects of such accounting standards on
a financial institution’s balance sheet;
(2) the impacts of such accounting on bank fail-
ures in 2008;
(3) the impact of such standards on the quality
of financial information available to investors;
(4) the process used by the Financial Account-
ing Standards Board in developing accounting
standards;
(5) the advisability and feasibility of modifica-
tions to such standards; and
(6) alternative accounting standards to those
provided in such Statement Number 157.
(b) REPORT.—The Securities and Exchange Commis-
sion shall submit to Congress a report of such study before
the end of the 90-day period beginning on the date of the
enactment of this Act containing the findings and deter-
minations of the Commission, including such administra-
tive and legislative recommendations as the Commission
determines appropriate.