Lots of misinformation swirling around out there; I feel compelled to set the record straight. M2M accounting is misunderstood; here is what it is and what changes due to today's actions (and non-actions).
Back in September of 08, when C traded at $20 and BAC traded at $30, the threat of regulatory capital requirements due to the old version of M2M sent the stocks into the extreme fear zone because there was no capital anywhere to be found. In the old system, capital issues caused from the inactive/frozen market of mortgage backed securities led to either failure of the bank or nationalization a la Washington Mutual, Fannie, Freddie, Lehman, Bear, Wachovia, etc... Now that future risk is taken off the table. Financial stocks have been priced for this kind of failure. That can now change. This was NEVER about financial statements or disclosure or transparency. OF COURSE ALL OF THOSE WILL REMAIN.
The decision is a type of regulatory forbearnace that allows the banking industry to earn out of their problems. It is about capital requirements; it is about survival; and it is about time (to heal).
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