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Question: If the banks are doing just hunky-dory due to the change in accounting rules, then why do they need any bailout money?
Paul Solman: Hunky-dory? You might find this online etymology of the term amusing. I have to admit that I find the term, applied to U.S. banks today, more than amusing; a barrel of monkeys, even.
Many banks are more nearly staying solvent than soaring as a result of the accounting changes, which exempt them from marking their assets (loans) down to today’s depressed market values. Were they to “mark to market,” who knows how much bailout money they might need to stay afloat.
Here are two Business Desk posts (here and here) that lay out the mark-to-market issue in more detail. Neither is LOL. But they’re pretty clear, I think:
As for bank balance sheets, our recent explainer does a decent job.
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