New off-balance sheet rule: Little impact on Wells
The new accounting standard requiring banks to bring assets back on balance sheet had a negligible impact on Wells Fargo. Despite having over $2.0 trillion of off-balance sheet assets, Wells consolidated just $10 billion of risk-weighted assets when the new standard took effect January 1. (See slide 17 in the bank’s supplemental earnings release)
The idea behind the new accounting standard is to bring hidden assets back into the light of day so that regulators can insure proper levels of capital are held against them. With Wells, this appears not to be happening.
Last summer, the bank estimated the new standard would raise risk-weighted assets by $46 billion.* In its last quarterly filing, it revised the estimate down to $25 billion.** When the standard finally went into effect, the figure was just $10 billion.
Total off balance sheet assets, meanwhile, were over $2.0 trillion at the end of September. (see page 31)
One reason for the giant difference is that “conforming” mortgages comprise a bit over half of Wells’ off balance sheet assets. These are eligible for a government guarantee via Fannie Mae, Freddie Mac, or Ginnie Mae, argues the bank, so it needn’t consolidate them since they pose no risk to its balance sheet.
Chris Whalen of Institutional Risk Analytics has argued this may be inappropriate. Some of these mortgages may be rejected by government guarantors — a more likely prospect it would seem with FHA beefing up standards. That could force Wells to take loan loss reserves against them.
A bigger question is the $900 billion worth of off-balance sheet assets that don’t qualify for a government guarantee. If indeed it’s fair for Wells to say it has so little exposure here, the bank should explain why to investors.
Ironically, the ultimate off balance sheet vehicles are the GSEs themselves: Fannie, Freddie and Ginnie Mae (which securitizes FHA loans). Though backed by taxpayers, the nearly $5.0 trillion worth of mortgages they guarantee aren’t included on Uncle Sam’s balance sheet.
With mortgage lending almost wholly dependent on GSE guarantees at this point, more of the nation’s housing stock disappears off-balance sheet every day…
——
*See page 13 of the Q2 10-Q.
**See page 14 of the Q3 10-Q.
about 7 months ago
FASB Statement 133 states that livestock are supposed be valued at fair market value.
about 6 months ago
How would you value securities that are not being sold righ now at any price? Do you account them as total loss or do you submit you best wild guess? The reason why the CDOs are in limbo righ now is because if they are priced to market values, these values will be low. Once there is a price, there will be a flood of Credit Default Swaps holders cashing in and bringing the banks down.
Even the market valuations of the mortgaged propeties is a very fluid number. If the mortgages become unavailable and the banks panic and dump millions of foreclosures to chase a handful of all-cash buyers, the values can easily tumble 50-80% overnight. Not to mention that it's impossible to do this kind of appraisal in 5 days and keep it constantly updated.
I'd propose to attack the problem head-on: slice CDOs into small pieces and dump them on bond market as junk bonds backed by mortgages for everybody to buy. I wouldn't obviously buy them for 100% or even 50% on a dollar, but at 10% even the most toxic subprime garbage may be a good deal. The point is that the price would find itself very quickly. I have no sympaty for the banks – let them crash and burn. And I do not believe that absense of the banks will be the end of the world. Interest rates will rise, lending will become more profitable and less risky. A mortgage for a house after 80% drop in prices will be very affordable even at 12% interest rate and far less risky. New companies will emerge and we'll see a lot of growth thereafter.
about 6 months ago
ah as cold hearted as you SOUND, there might be a legitimate REASON why your wife cheats on you!!!!! You sound more like your marriage was a BUSINESS rather then a relationship…. I feel sorry for you that you had to FIND your wife in the arms of another man—but think about what might have PUSHED HER TO IT…. could it be that just MAYBE you are at fault here???? Oh trust me—cheating is NOT something to be proud of either…. but, people CHEAT for reasons… Sorry charlie, a divorce if you are in a community property state means all marital assets split 50/50 and you can bet your LIFE she knows what most of those assets are…and if you go liquidating them, she WILL find out… then you will have a cheating wife with LEVERAGE!!!! just go to her and tell her you KNOW about the cheating—that you SAW IT… and take it from there—but any money or assets you earned WHILE MARRIED are legally half HERS!!!!!
about 5 months ago
I dont think so, be careful of companies claiming to help you. You really have to do your research. I was in a situation myself and i know a good loss mitigation firm that saved my home. If you want info on them email me.
about 5 months ago
It's not a question of "how many countries are on Google Analytics" as Analytics is merely a website statistics software
So every country can be on Analytics provided that their people visited your site and your site is tracked by Analytics — then their country will show in the info on your site visitors
about 5 months ago
It's not a question of "how many countries are on Google Analytics" as Analytics is merely a website statistics software
So every country can be on Analytics provided that their people visited your site and your site is tracked by Analytics — then their country will show in the info on your site visitors
about 5 months ago
It's not a question of "how many countries are on Google Analytics" as Analytics is merely a website statistics software
So every country can be on Analytics provided that their people visited your site and your site is tracked by Analytics — then their country will show in the info on your site visitors
about 5 months ago
GAAP is exceedingly useful because it attempts to standardize and regulate accounting definitions, assumptions, and methods. Because of generally accepted accounting principles we are able to assume that there is consistency from year to year in the methods used to prepare a company's financial statements. And although variations may exist, we can make reasonably confident conclusions when comparing one company to another, or comparing one company's financial statistics to the statistics for its industry. Over the years the generally accepted accounting principles have become more complex because financial transactions have become more complex.