Goldman Years

In my last report, I opined that Wall Street analysts (many of whom are CFA charter holders (The CFA Institute was against the MTM changes)) would not view the FASB's changes to MTM accounting favorably. Goldman analyst Richard Ramsden published in a report: "Our core view is that banks will not bottom until underperforming asset growth decelerates." He continues: "Loans are going bad faster than banks earn money."

This is not dissimilar from what I have written in the past. Research reports from around Wall Street indicate that only 70% of toxic assets were subject to mark to market to begin with. The effects of record or near record layoffs have not been fully accounted for in mortgage delinquencies and defaults. There is usually a lag as unemployment benefits and severance funds run out. If the stress test is an honest assessment of the banks, we could very well see more capital injections into the most troubled banks.