Mark-to-market change might be nonevent for stocks

moneymaker

With Thursday decision already baked in, enthusiasm might be short lived
By Nick Godt, MarketWatch
Last update: 6:16 p.m. EDT April 1, 2009
Comments: 249
NEW YORK (MarketWatch) -- For weeks, investors have been expecting regulators to change accounting rules that would allow banks to recoup some losses already taken on illiquid mortgage assets, making Thursday's official decision by the Financial Accounting Standards Board almost a nonevent, analysts said.


But those high expectations are setting the market up for a big disappointment if rule makers actually balk at making changes.
"There might be a little bit of a positive reaction, but the move in stocks has already taken place as regulators already said they were considering changing the rule back in early March," said Fred Dickson, chief market strategist at D.A. Davidson & Co.
But "in the event they recommend no changes, we could see a sell-off," Dickson said.
Chart of XLF
The stock market rallied sharply in March, posting its strongest monthly gains in six years. A big chunk of those gains was led by the financial sector. While the broad S&P 500 index ($SPX:
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$SPX 811.08, +13.21, +1.7%) rallied 8.54% in March, the Financial Select Sector SPDR (XLF:
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XLF 9.06, +0.25, +2.8%) , an exchange-traded fund that tracks the S&P's financial sector, jumped 16%.
The accounting board, known as FASB, is scheduled to vote Thursday on giving auditors more flexibility in valuing illiquid mortgage assets that may have a long-term value and strong cash flow. In other words, they are not distressed assets, but they cannot be sold in the markets today.
The change in the rule is expected to be retroactive, giving bankers the ability to revalue some assets in time for the first-quarter reporting season, which starts this month.
The change would also give banks a break from pressures to raise capital. As banks wrote down trillions of bad assets over the past two years, many were forced to seek additional capital. For some of the biggest financial institutions, that capital has had to come from the government to prevent them from going bust.
Doubt remains
Besides the positive impact on capital pressures, the likely boost to banks' first-quarter earnings, there remains a considerable amount of doubt among market participants about the effectiveness of changing accounting rules.
"To start with, it's a little confusing from a policy standpoint," said Owen Fitzpatrick, head of U.S. equities at Deutsche Bank.
Treasury Secretary Timothy Geithner last month provided details of his plan to encourage private investors, backed by public money, to purchase some of the bad assets plaguing the banks' balance sheets.
"But if the new rules can allow them to price these assets higher, they won't have as much of an incentive to sell them and therefore it doesn't make complete sense with Geithner's plans," Fitzpatrick said. End of Story
Nick Godt is a MarketWatch reporter based in New York.

源济

winterstorm

winterstorm

xiaoxiaozhang

Hope so!

qiangge

coexist

不会安静的

牛B家

this makes sense why banks will explode upward

weigoodone01

leftright

ding