Tuesday, June 23, 2009

FASB Close on 'Off-Balance' Sheet Change

Posted by Noah Rosenblatt on April 30, 2009 at 12.27 PM
"...The estimate is for $900 Billion in off-balance sheet assets in 2010, as the rule takes effect. I think it would be safe to say that this estimate is highly conservative, as were most estimates of the depth of the writedowns since the beginning of this debt deflation episode. If Citigroup had over $1Trln of these assets placed off-balance sheet in mystery entities, what do you think the rest had? Understand, that banks probably used excessive leverage to finance these assets!
How about $5.2 Trillion? Bloomberg's David Reilly discussed the threat in late March:
At the end of 2008, for example, off-balance-sheet assets at just the four biggest U.S. banks -- Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo & Co. -- were about $5.2 trillion, according to their 2008 annual filings.
Even if only a portion of those assets return to the banks - - as much as $1 trillion is one dark possibility -- it would take up lending capacity the government is trying to free. Whether these assets are "troubled" or "toxic," their return to bank balance sheets could slow efforts to get credit flowing again..."

No comments: