Banks failing, so they are changing the rules….

June 19, 2008

The Wall Street Journal is telling us that there is a new game being played by banks to help make their book of businesses, “look” better. It is a desperate move but the problem is the lack of regulation that continues to allow for this latest form of unethical behavior.

David Enrich writes

In January, Astoria Financial Corp. told investors that its pile of nonperforming loans had grown to about $106 million as of the end of last year. Three months later, the thrift holding company said the number was just $68 million.

How did Astoria do it? By changing its internal policy on when mortgages are classified on its books as troubled. The Lake Success, N.Y., company now counts home loans as nonperforming when the borrower misses at least three payments, instead of two.

This type of blatant disregard for the consumer and shareholders will continue as the FED and the Treasury turn a blind eye. Yet, the truth is that this immoral and I daresay borderline criminal action will continue. Let’s face it, there is really no teeth and not enough of a deterrent that provides for a second thought by any of the laws on the books today.

As long as off-balance sheet deals and creative bookkeeping is allowed, feel confident that this will go on indefinitely.

On the other hand, if the banks continue to operate under the current rule set, how long will they be able to stave off the inevitable if their book of business is failing. AND, one more thought…are we all culpable as well as it is somehow in our best interests that they stay solvent and therefore ignore the obvious?

What can we as investors do anyway except vote with our buy or sell orders?

Stocks: (NCC) (WM) (COF)

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Written by Andrew Horowitz · Filed Under Markets, Stocks 

Comments

2 Responses to “Banks failing, so they are changing the rules….”

  1. Jonathan Lawson on June 19th, 2008 12:24 pm

    Andrew,
    you have been talking about the shenanigans for some time. Kudos to you. Just 3 weeks ago S&P 1440 (remember that), a majority of people were saying we are out of the woods.
    It should make anyone who is invested in a long only type funds, or bond funds for that matter Furious.

    Now they are trying to bury turds in the sand. I am bullish on America, and the innovative spirit of Americans. But bearish on the market, and the refusal to face the music.

    Excuse me while I ride my bike past the gas stations, and protect my gold coins.

    jon

  2. Edmund Jakopchek on June 21st, 2008 12:51 am

    I rather these bankers get fired, dissolve them, competent bankers will take their place.

    As a career choice they should be working at Burger King, if they screw up there, its only a burger. I should be able to deal with it.

    If they (the bankers) keep up their ways, it devalues my money and everyone else’s when big.gov comes in to bail them out. Start making the offender pay instead of the taxpayer. This is simple and common theft, maybe jail time is needed, but BK could be their just rewards instead.

    Edmund

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