FASB Unveils Relaxed Mark To Market Rules


Reports are coming in that the Financial Accounting Standards Board (FASB), as expected, has voted to relax the fair-value accounting rules, essentially allowing banks to mark securities to a model rather than to market prices.

This is being done in response to a blatant threat by Congress that if FASB did not relax the rules, Congress would do so by legislation.

Banks have rallied on positive comments from bank officials about being operationally profitable in the first two months of the year, and on hopes that the Obama administration's many plans to help out banks will bear fruit.

They have rallied again on hopes that mark-to-market rule changes, which will be retroactive to the first quarter, will relieve them from taking further heavy losses on investments.

Regardless, it is likely that changing the rules will: 1) not get any toxic assets off balance sheets, and 2) make banks more reluctant to part with those distressed assets.


1) Impressive worldwide rally, particularly in Asia, where Hong Kong shot up 7.4 percent; autos and commodities led. China's March PMI index rose above the magic 50 level for the first time since September.

2) Commodity stocks are rallying, with copper at the highest level since November, most big-name commodity stocks like AK Steel and ArcelorMittal up high single-digits.

3) Bank stocks are rallying, partly on an optimistic tone from the G20, but also because the House of Representatives, in a new display of moderation, passed another executive compensation bill yesterday, which drops the 90 percent tax on bonuses for people that make more than $250,000 at firms receiving TARP money, and gives Treasury more discretion in deciding which bonuses are excessive.

4) Auto dealer CarMax saw its Q4 results beat Street expectations despite a "sharp decline in customer traffic."

While overall same-store sales fell 25 percent, new vehicle sales were particularly weak, plunging 41%. The company anticipates continued weakness ahead, but refrained from providing a full-year earnings outlook.

5) Seed provider Monsanto up 4 percent pre-open reported Q2 earnings of $2.16, 9 cents ahead of the street's consensus. Revenues grew 8 percent on stronger corn and soybean seed sales.

Despite the strong quarter, the company remains cautious for the second half of the year, as its 2009 guidance of $4.40- $4.50 falls well below expectations of $4.69.

6) MGM Mirage is soaring 27% pre-open as the Wall Street Journal reports that Colony Capital is weighing an investment in the casino's $8.6 billion Las Vegas City Center project. Investors hope that a significant capital infusion would save the project from bankruptcy.

3) B of A CEO Ken Lewis, speaking on our air, said "I am optimistic we are getting close to the bottom," and that the next six months will be gut-wrenching "in a positive sense" (whatever that means). He noted that a year from now unemployment should be holding steady or improving.




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