Comments on: Should US banks be allowed to lie?

By: Mike Sax

Mike Sax — Sun, 22 Mar 2009 17:54:14 +0000

Martin,

The asset valuation systems used are two extremes. Neither is a true representation of the bank’s long term assets and risk.

It should be possible to create some kind of 30-year rolling market value average formula that reduces volatility and at the same time provides a deterrent to take on too much risk. Why has nobody done this before?

- Mike

By: Moffe

Moffe — Fri, 20 Mar 2009 12:00:05 +0000

Different banks for different realities. It’s a lovely mix of trust, greed and ignorance. S. Pancha would use Santader, ignorantly waiting for excessive returns on the overvalued assets. Plumber Joe trusts Bank of America to give him excessive returns on their non excisting assets. D.Q. is raving mad and doesn’t trust banks, hence keept them in his matrass. As a former financial analyst it’s nice to see the world is cathing up with me; everybody seems clueless on what the correct asset value should be.

By: cova

cova — Thu, 12 Mar 2009 09:35:34 +0000

I tend to agree with you often but not this time.Felipe is totally right.
Banks in Spain are still quite “conservative” and they are obliged to put many reserves aside…

By: yani

yani — Wed, 11 Mar 2009 23:40:23 +0000

Martin,

I agree with you, though the term ‘lie’ may not adequately describe what you are talking about. In business, putting everything into numbers that are accurate(!) or fair(!) is almost an art, because the techniques of assessing + market conditions&psychology(expectations) are big factors and both are always disputable – the range of ‘truth’ is just broad, even for hard assets like real estate, if you consider a longer period of time. In non-business areas, this is also an issue because small mistakes may destroy a lot of value ( as you mentioned ‘marriages’ etc.). There is no need to tell a person that he/she be ‘objectively’ ugly, when there is no benefit for anyone out of it just for the sake of being honest.
So different than north european cultures (i.e. US, anglosaxon, even germany), many cultures apply a more ‘fuzzy’ approach because people make mistakes. Having said that, it should not be understood as an invitation to lie, rather to understand that defining ‘truth’ is quite an art and that people make mistakes (and not every mistake should be punished until the very end nor that after a mistake has been revealed that actions of that respective person who lied will be controlled meticulously).

By: felipe

felipe — Tue, 10 Mar 2009 18:48:25 +0000

This is complete BS.
Spanish banks follow standard accounting rules and have regulations that have been praised all around the world. Their rules regarding putting aside reserves in good times and not allowing off balance accounting are being taken as a model for others. Valuing assets at market prices is a time bomb, it is the time bomb that has exploded in the face of the american economy. The market is a manic-depressive. In 2007 the assets of spanish banks were written at the price they paid for them, even if the assets were bought ten years before and that value had risen, while the assets of american banks were booked at their current market price (which has been proved to be overvalued). If the spanish financial institutions are surviving and growing in this conditions is because their assets have been accounted fairly and not by a manic depressive.

PS: It should be mentioned that Martin and his bankrupt business have a fat file in all spanish banks.