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To: Mr.Gogo who wrote (45041)	10/19/2011 2:26:33 PM
From: Wowzer	Read Replies (1) \| Respond to of 78708

Back in 2008 2009 banks increased loan loss reserves dramatically to cover expected losses from mortgage/commercial loans. Now due to additional analysis history etc these banks now believe that they over reserved for these loans and or the actual losses from these loans is not as bad as originally expected. So they can either reverse or debit loan loss reserves (usually pretty rare regulators don't like to see banks do that) or the more likely case they significantly lower the amount credited to these reserves in the current which lowers expenses in the current quarter.

To: Mr.Gogo who wrote (45041)	10/19/2011 2:52:45 PM
From: Spekulatius	1 Recommendation Respond to of 78708

>>Can anyone explain to me why all of a sudden all banks report higher earnings on accounting gains? What is the logic behind it. Do they put aside less money for reserves? And if this is the case why do they do that?<< There are various aspects of accounting gains. Some have market to market gains due to bonds appreciating in value. other show reserve releases due to the fact that their non-performing loans have been decreasing. I have not issues with that. What I have an issue with are the accounting gains on the liability side that run through the income statement. What happens is that debt spreads for banks have been increasing rapidly during the last few month, which means that their debt is worth less (they are essentially considered less creditworthy) and since now the liabilities are worth less, the bank is booking an income gain (even though these gains are highly hypothetical since they never could buy back this debt and issue new debt at nominal). This part is not an accounting trick, it is required by GAAP, but theose rules I suspect have been set by the banksters who desire to show less income volatility. While required by GAAP, it makes a mockery of common sense for most of us.