Submitted by Tyler Durden on 10/30/2012 - 14:13 Capital Markets Commercial Real Estate Comptroller of the Currency GAAP Housing Bubble Market Crash non-performing loans None Real estate Reality
Readers of Zero Hedge know well that one of the most abhorred (by us) accounting gimmicks employed by banks each and every quarter over the past 3 years to boost their bottom line, is to engage in loan-loss reserve releases: a process which has absolutely no associated cash flow benefit, but merely boosts EPS for GAAP purposes. In some cases, like this quarter's absolutely farcical JPM earnings release, the abuse is beyond the pale, as the offending bank releases reserves even as it reports surging non-performing loans: two processes which in a normal world can not coexist. Yet quarter after quarter banks keep on doing this, and in fact a big part of Q3's to date EPS outperformance is courtesy of financial company "earnings", of which, in turn, loan losses amount to about 50% of the entire blended financials bottom line. Yet while we can rage and warn, nothing usually happens until there is a market crash due to the gross manipulation of reality that such an activity entails. Luckily, this time someone with more clout in the legacy establishment has now stood up to warn about the mounting dangers associated with the relentless abuse of loan-loss reserve releases: none other than the US Comptroller of the Currency.
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http://www.zerohedge.com/news/2012-10-30/stop-manipulating-bank-earnings-loan-loss-reserves-currency-comptroller-warns
Realist - Everybody in America is soft, and hates conflict. The cure for this, both in politics and social life, is the same -- hardihood. Give them raw truth.
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