FASB Officially Relaxes M2M Rules

So now FASB officially recognizes what anyone with a brain that was utilized knew: most of these assets have value, some significant. I think that FASB has given banks the latitude they need and the regulators the room they need to ban the term "toxic."

Am I 100% satisfied? No. It's not as good as I would like. In fact, in some cases it is not as permissive as I would like, with accounting for BK and STT, for example. Disappointing, even. Worse, FASB says it has already been permissive for the bargain-basement assets STT and BK have. It doesn't matter, though -- this is permission for the regulators to look the other way. Bad banks will still run out of capital after this. There will still be problems.

No doubt, we have a material number of loans, whole and collateralized, that are miserable and nonperforming. But it is hard to believe that JPM and BAC and WFC and C won't win here, as the stigma is lost and we now have assets that are potentially valuable. Will this delay the inevitable like Japan? No. I think that Japan's problems were a lack of consumption ("too much" saving) and a lack of population growth. You simply cannot maintain the 400,000 homes built and the 40% decline in prices and still say housing will go down inevitably.

I think this is psychological. But it is very big.

I read about hedge funds that don't want to play in the public-private partnership. Baloney. You just know groups are being put together right now to buy these assets. Bargain-basement assets will be sold, and money will be borrowed from the Fed to finance them, so the rate will be locked in and some players out there will hold them, provided they were not second-lien California-issued by outfits like Ameriquest, or Novastar, or Fremont - the bad issuers - and I believe fortunes will be made. In fact, I predict, in a few years' time, investigations by the morons in Congress over "excessive" profits from these transactions.

In my opinion, unemployment still goes at least a little higher. That lags. The auto companies will still be humbled. Housing starts will stay low.

But what matters is the rate of change of decline has stopped, or in some cases halted, and that's why you can have this kind of rally in credit, in commodities, and ultimately, common stocks.