Posted on 04/13/2010 2:03:27 PM PDT by Faketan
I thought I was seeing things yesterday.
The Federal Reserve released its weekly numbers on U.S. bank lending. And it looked like there had been some kind of mistake.
Outstanding loans and leases at U.S. commercial banks jumped by a staggering $420 billion in the week ended March 31. An unprecedented leap.
US Bank Loans and Credit – Chart
As it turns out, there's a reasonable explanation. It's not that Americans suddenly rushed to take out loans.
The jump was caused by "Financial Accounting Statements No. 166". This new set of rules deals with the way U.S. banks must handle off-balance-sheet vehicles (OBSVs).
Prior to the financial crisis, OBSVs were common. When banks acquired particularly risky assets such as sub-prime mortgages, they would create a special holding company to take possession of these instruments. Full article at: Outstanding Loans
(Excerpt) Read more at oilprice.com ...
Oh, I see. It sounds line the result of new disclosure regulation(s). Thanks for the clarification.
If I were a large bank in this country, I’d be working to cut costs, while building capital reserves and slowly bringing all the bad debt back onto the balance sheet or dumping it.
That way, you stay in business and don’t have to declare bankruptcy.
In fact, it seems to me that’s what the banks are trying to do. Now if we can keep our president from screwing things up further, we might just survive.
mmm
Citi is doing just that. They are following a strict business plan. We’ll see if they expose any skeletons from their closet.
KD updated that. He’s still worried, though, because it’s a major shock to balance sheets.
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