Lots of cross-currents today. The bad news is the ADP report was very poor, implying that nonfarm payrolls on Friday will be weaker than expected.
But there is good news as well, as the ISM report, as well as GM and Ford's February sales reports were, as they say, "less bad."
Another important mover has been financial stocks, which have rallied on the assumption that the Financial Accounting Standards Board (FASB) will approve major changes to the mark-to-market rules when it votes tomorrow.
To recap:
1) Changes made to mark-to-market rules (FAS 157) were adopted by the FASB and became effective in November, 2007. They provided clarity on the definition of fair value, but most importantly clearly implied that quoted prices were more valuable for determining fair value than marking to a model.
2) Bank officials have objected that many securities do not have an active market and so placing priority on a "last trade" to determine fair value has little or no value.
3) FASB will be voting on additional guidance on how to determine the fair value of illiquid or inactive assets where there is not sufficient trading activity to create a fair mark.
3) Auditors could employ "significant judgment" in valuing those assets, essentially allowing them to be marked to a model created by the auditors/bank, rather than to market.
4) This would be applicable to Q1 earnings.
TARP money: the give-back has begun. In an indication that the bank stress-test has already been concluded for some small banks, five banks announced they had returned TARP money to the government.
Today, Sun Bancorp said it had received approval to repurchase its preferred stock from the Treasury Department, worth about $89 million
Old National Bancorp repurchased $100 million of preferred
IberiaBank repurchased $90 million of preferreds
Bank of Marin Bancorp repurchased $28 million of preferreds
Signature Bank of New York returned $120 million as well.
Some also need to repurchase outstanding warrants. Regardless, it's clear that some of the smaller banks are being given an all-clear.
Whether a larger institution could return the money is unclear; all we know is that the regulators must approve.
Certainly, a large, "systemically important" bank would not be allowed to return money until the stress test is completed, and it's not clear if they will be allowed to do so even then.
