Word: bankes
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...rally that took the S&P 500 up 6.4% to 720 got most of its fuel from bank stocks. Whipping boy Citigroup (C) moved up 38% and that pulled other banks such as Wells Fargo (WFC) up almost...
...moment, there are few buyers for the toxic assets that are poisoning Citigroup, Bank of America and other major financial players. The unsellable loans sit on the banks' balance sheets at a huge loss, priced from zero to an optimistic 60% of what they might have sold for before the crash...
...time of pessimistic forecasts and rising fear, many toxic assets are probably worth more than the bank models or credit-default-swap indexes suggest. For example, a recent reading of the ABX index puts the value of even the highest-rated subprime mortgage bonds created in 2007 at only 27% of their precrunch prices. Yes, Americans are behind on their mortgages, but even the most pessimistic prognostications do not predict that 73% of home loans will become worthless. (See pictures of the dangers of printing money...
...Others seem to be coming around to the banking industry's position. On Tuesday, Federal Reserve Chairman Ben Bernanke said he would support changes in pricing illiquid assets. Also this week, investor Warren Buffett said in a CNBC interview that he would favor suspending the mark-to-market rules. Even the Securities and Exchange Commission (SEC), which has long backed these rules, recently asked the Financial Accounting Standards Board (FASB), a private group based in Norwalk, Conn., that sets accounting rules in the U.S., to look into the matter. FASB spokesman Neal McGarity says his organization is doing that...
...resistance? The FASB and the SEC say mark-to-market accounting is a key to the economy's transparency, and want to proceed cautiously before changing the rules for illiquid assets. Investors are already skeptical of bank stocks. Add more uncertainty to their books, and the shares might fall further...