US Banken müssen nach den neusten SEC Richtlinien zu SFAS 157 ( eine Vorschrift die mehr Transparenz bringen sollte) Hypotheken bzw. Immobilien nicht mehr zu Marktpreisen verbuchen bzw. wertberichtigen wenn “those prices are the result of a forced liquidation or distressed sale.”

Diese vertrauensbildende Massnahme wird die Krise sicherlich stark verkürzen …

The Grand Delusion Rally
By RANDALL W. FORSYTH | MORE ARTICLES BY AUTHOR

A LETTER RELEASED LATE FRIDAY by the SEC about an arcane accounting rule provide the spark that set off the stock market’s explosive rally this week?

Led by financials, the Dow Jones Industrial Average Tuesday recouped nearly 400 of the 1,000 points it surrendered in the first quarter. The Financial Select SPDR surged 7% in the session, halving the nearly 14% negative first-quarter total return in the exchange-traded fund’s net-asset value, as calculated by Morningstar.

Fuel, air and a spark are required for combustion. You can have a full tank of gasoline, but a blocked air filter or a fouled spark plug will prevent an engine from starting.

In this case, the spark may have come from a letter posted on the Securities and Exchange Commission’s Web site Friday afternoon regarding Statement of Financial Accounting Standards 157, which attempts to deal with the knotty problem of placing a “fair value” on a company’s assets.

Easier said than done, especially for inscrutable assets, such as derivatives, that SFAS 157 places in so-called Level 3. Those have no “unobservable inputs,” in the parlance of the Financial Accounting Standards Board. Or, as former Defense Secretary Don Rumsfeld might have defined them, these are “known unknowns.” We may know what collateralized debt obligations are, but who knows what they’re worth?

(For the record, Level 1 assets are those for which there are active quoted markets. Level 2 assets may not have quoted prices, but there are comparable assets to provide “observable inputs” that can impart some information about their values.)

Late Friday, the SEC tried to clarify one aspect of this accounting arcana for these topsy-turvy times. Companies should use market prices to value assets, even when markets are less liquid than normal — “unless those prices are the result of a forced liquidation or distressed sale.”

“Ay Caramba!” as Bart Simpson might say. This lets everybody off the hook.

These days, when it comes to a CDO or anything that’s not an off-the-rack security, the holder is apt to contend that any sale is “a forced liquidation or distressed sale.” That means those assets shouldn’t be marked to market, but marked to model or, as some cynics say, marked to myth.

In other words, the SEC’s clarification of SFAS 157 gives financial companies lots of leeway in valuing assets, and avoiding writedowns. Those writedowns have hit earnings as well as the balance sheet. Limiting those helps stockholders on both scores; the lesser impact on earnings is obvious, while the mitigating the balance-sheet impact means a reduced need to raise capital, which is apt to be expensive or dilutive, or both.

But if the reduced values don’t have to be recognized, per the SEC’s missive, financial companies don’t have to suffer their effects in terms of writedowns. No harm, no foul, in effect.

To be sure, financial stocks also took heart from Lehman Brothers’ ability to raise $4 billion, which the investment bank swore it didn’t need, via a convertible preferred offering and UBS’ announcement of a $19 billion writedown.

The markets seemed to say the worst is over. Surely, after UBS’ monster writedown, that should be it. And Lehman’s financing indicates banks can readily refill the coffers drained by credit losses.

But to Bank of America’s credit analyst Jeffrey Rosenberg, the market’s response represented the proverbial victory of hope over experience. Weren’t Citigroup’s losses suppose to mark the nadir? Or was it Merrill’s writeoffs? Or the Bear Stearns debacle?

Or perhaps it was the license given by the SEC not to mark to market anything in a distressed sale.