Hey, after a gauntlet of market report releases for the month of July, I’ve been sort of AWOL for the past several days. Hey. It’s summer. Tomorrow I ride on a rollercoaster…literally.

Last week, the FASB decided to delay the proposed accounting rule that keep banks from hiding assets via special purpose entities (SIVs)

>The rules were tightened, but criticism erupted again last year after some banks suffered large losses from structured investment vehicles and other entities that had been kept off balance sheets under the rule.

Everyone seems to want less regulation:

SEC Chief Warns against Investment Bank Regulations

>”Rather than extend the current approach of commercial bank regulation to investment banks, I believe Congress and regulators must recognize that different regulatory structures are needed for oversight of these industries,” Cox said. “Put simply, regulatory reform should not, and need not, amount to the elimination of the investment banking business model.”

The Mortgage Bankers Association was relieved about the delay, likely because it will give them more time to modify or prevent the change from happening.
Kieran P. Quinn, CMB, Chairman of the Mortgage Bankers Association commented in the press release about the impact of new rule on credit liquidity. (Incidentally, I am guessing this is the same Kiernan I spoke to fairly often as one of our mortgage clients. He was a straight shooter who was very loyal to firms who provided high quality appraisal work. So admittedly, I give more weight to what he says…). He today commented on the decision by the Financial Accounting Standards Board (FASB) to delay, by one year, implementation of a forthcoming proposal that would bring sweeping changes to securitization accounting.

>Consolidation of securitization QSPE is likely to swell the balance sheets of the affected entities, adversely impact financial ratios, financial covenant performance and regulatory capital tests; and bring a new chill to credit markets at the exact time when all market participants are working to relieve the current credit crunch. We look forward to working with the FASB to implement the changes and make this transition as smooth as possible.

The full disclosure catch-22: If the accounting rule is implemented, the use of SIV’s and other off balance investments will be sharply curtailed,

1…causing the ratios to show an increased need for more capitalization which equals less liquidity in the market, which is just what the credit markets don’t need.

2…preventing what got us here in the first place – a lack of understanding about the true risk associated with a given lender.

So we need to ask ourselves a question…Do I feel lucky?” Well, do ya, punk? In other words, do we want greater liquidity to help housing out of its current mess, or do we instill the basics in a financial system that lost its way? I seem to remember last year at this time, we got in the credit mess because of the lack of disclosure, no?

>If we feel lucky, we can ignore issues where we think there is a wide margin for error without the risk of serious consequences.

Or do we stand in line and get the new iPhone 3G?

Full disclosure: I finally got my Apple lemming fix and waited in line at the Apple Store. Was already in the store with my son getting a 6 year old laptop resuscitated (couldn’t) and stood, on a whim, in the line for the iPhone in front of the store. The Apple employee informed us the store had 7 iPhones left for the 10 customers in line. She also informed me that some of the people may not be able to get out their existing phone carrier contracts and may exit the line. A few minutes later, the first person left. 2 more to go. Was wishing I had a voodoo doll handy. 5 Minutes later, the next person in line was informed by his wife via phone that it would be a cold day in hell before he was buying another cell phone. One person in front of us in line with no one behind us. Like the man on the bubble position at the Indianapolis 500. The last remaining customer was speaking with ATT and getting more and more aggravated. My son and I winked at each other because the prospects looked good. 10 minutes of wrangling bringing the store manager to the phone, pleading and scolding the telcom rep were unsuccessful. An Apple employee came to me congratulating me as if I won the Publisher’s Clearinghouse Sweepstakes. A few cheers were made by Apple employees as I was taken into the store. The white 16 Gig iPhone 3G was mine…(as long as I bought an ice cream cone for my 9 year old who patiently waited the half hour with me).