I'm also surprised the Big 4 Accounting firms have been left out of the discussion and have avoided any blame. Every corp has to have yearly audited financial statements by Deloitte, Price etc and they have to attest to the financial condition of the co's as to an ongoing concern etc.
What makes you think the banks are the phonies and not the investors who prop up the worthless stocks just as it wasn't the banks that created the liar loans who are the cause of the current mess but the dumbass borrowers who didn't know any better? My advice is to wrap your ass around your head for the next five years and forget everything that took place up to now. They're not real. They're all figments of your colorful imagination. cinyc (for those who are dyslexic)
Again - are you claiming that they are violating GAAP or simply that you don't agree with how GAAP treats various assets? GAAP standards are fairly rigid about what and when assets can/must be written down. There are also guidance as to when an asset is impaired and as such. So are you claiming that the banks have violated GAAP guidelines, or do you simply assumed accounting books should represent what you believe in rather than follow well-known standards?
Both? Really. Can you point out exactly which GAAP requirement the banks have violated? Again, I point out the rules for impairing assets is very complicated, so a general statement about "worthless assets" won't do. Give me an actual FASB number. Of course you can't. And no, the government can't violate GAAP by definition. So if you want to argue that the government is changing the rules to suit their needs, fine. I'm not necessarily disagreeing with you there. But that's very different from what you are saying - which is that the banks are "cooking" their books.
Of course banks are cooking their books. Not to be rude but, where you live? Under a rock? Let's take the wikipedia GAAP page: http://en.wikipedia.org/wiki/GAAP "Principle of prudence: This principle aims at showing the reality "as is" : one should not try to make things look prettier than they are" The gov't promoted mark-as-you-want (mark-to-fantasy) clearly violates showing the reality. "Principle of non-compensation: One should show the full details of the financial information and not seek to compensate a debt with an asset, a revenue with an expense, etc" Banks account unrecoverable loans as "assets", thus you hear news about a bank with $800M deposits, $1.5B "assets"; yet they are filing for bankruptcy. I could get down to FASB details but I will have to charge.
That's pure rubbish. Banks don't determine how they "value" their assets. Independent auditors make that determination and as a whole, the external auditing group is vastly improved from the Enron days. So I doubt there was coordinated fraud going on here by banks and the auditors.
Another thing...any idiot can see those "unrecoverable" assets on a balance sheet. It's called other comprehensive income and it isn't "hidden". It's very much out in the open and transparent as to which banks have unrealized losses.
This depends on how the investment is classified. Unrealized gains/losses are recorded through the income statement for held-for-trading securities other comprehensive income for available-for-sale securities. Held-to-maturity securities are recorded at cost with unrealized gains/losses amortized over the life of the security.