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Inside Washington (05/01/2009)
* WASHINGTON (5/4/09)--Mark-to-market accounting did not have a big impact on banks’ first-quarter financial results, according to several large financial institutions (American Banker May 1). James Dimon, JPMorgan Chase and Co. chairman and CEO, said the rules ended up being “a big hullabaloo about nothing.” Wells Fargo and Co. said the rule change shrank its securities losses by $4.4 billion without affecting earnings. But despite the initial comments from banks, some financial observers say that because the adjustments impacted the balance sheet instead of the income statement, investors still do not know how the change impacted banks that adopted the rule in the first quarter. Some investors say the accounting change helped banks minimize losses. But Scott Marcello, U.S. deputy leader of financial services at KPMG, says the results indicate that fair value accounting will have staying power. The change, known as FAS 157-4, provided new guidance for financial institutions on how to determine if a market is still active. FAS 157-4 also changed how companies can value illiquid assets ... * WASHINGTON (5/4/09)--Many programs created to prevent the nation’s financial system from collapsing last year were put together quickly, with a short-term focus, according to three designers of the Troubled Asset Relief Program (TARP). David Nason, former Treasury assistant secretary for financial institutions; Kevin Fromer, former assistant secretary for legislative affairs; and Phillip Swagel, former assistant secretary for economic policy, spoke at a conference Wednesday about TARP (American Banker May 4). Many Treasury officials, in designing the programs to help the economy, didn’t have time to second-guess, according to Nason. Even when officials tried to anticipate market reactions, they were often wrong, Swagel added. The officials noted their disappointment with some institutions’ failure to take the Treasury’s offers to buy their illiquid assets--which were then liquidated for less ... * WASHINGTON (5/4/09)--Starting in June, commercial mortgage-backed securities and securities backed by insurance premium finance loans will be eligible collateral under the Term Asset Backed Securities Loan Facility (TALF), according to a policy statement released Friday by the Federal Reserve Board. The Fed also said it would continue to evaluate the $100 billion limit that TALF loans with five-year maturities carry. Some of the interest on collateral financed with a five-year loan could be diverted toward an accelerated repayment plan. The policy statement indicates that the Fed could be backing off because few investors have participated in the program, according to Chris Low, chief economist, First Horizon National Corp. (American Banker May 1). Oliver Ireland, former Fed lawyer, said the statement shows that the Fed is thinking more realistically and is looking for other ways to fund retail credit and foster lending ...


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