Banks’ Toxic Assets Still There: The Accounting Cannot Be Trusted

08/13/2009 • Investment Watch

The Congressional oversight panel (COP) of the TARP program is just out with its August report (http://cop.senate.gov/documents/cop-081109-report.pdf). In it, it warns: “Treasury‘s choice to pursue direct capital purchases resulted in a notable stabilization of the financial system, and it allowed the write-down of billions of dollars of troubled assets and reserve building. But, it is likely that an overwhelming portion of the troubled assets from last October remain on bank balance sheets today. “If the troubled assets held by banks prove to be worth less than their balance sheets currently indicate, the banks may be required to raise more capital. If the losses are severe enough, some financial institutions may be forced to cease operations. This means that the future performance of the economy and the performance of the underlying loans, as well as the method of valuation of the assets, are critical to the continued operation of the banks. “For many years, banks were requi

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Banks’ Toxic Assets Still There: The Accounting Cannot Be Trusted

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