The Epic American Credit and Bond Bubble Laboratory Message Board

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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: YanivBA who wrote (69485)	9/8/2006 3:29:57 PM
From: ridingycurve	Read Replies (1) of 110194

<<Even the loans that blow up can be hidden with fancy bookkeeping. David Hendler of New York-based CreditSights, a bond research shop, predicts that banks in coming quarters will increasingly move weak loans into so-called held-for-sale accounts. There the loans will sit, sequestered from the rest of the portfolio, until they're sold to collection agencies or to investors.>> Someone help me understand why categorizing such loans as held-for-sale will be beneficial. Credit losses must still be recognized and valuation allowances established. Additionally, held-for-sale loans must be marked-to-market. If credit quality deteriorates, loss recognition could accelerate compared to categorization as held-for-investment. Perhaps GAAP has changed in the past few years and I’m unaware of it, or my memory is failing me.

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