Banks Hide $35 Billion in Writedowns From Income, Filings Show

Submitted by Ronald Tennant with Metrocities Mortgage:

Bloomberg (05/19/08); Onaran, Yalman
Hit hard by record losses resulting from the collapse of the mortgage securities market, regulatory filings show that the nation's banks and securities firms are failing to acknowledge at least $35 billion of additional writedowns in their income statements. For example, Citigroup Inc. subtracted $2 billion from equity for the declining value of home-loan bonds in its quarterly report to the SEC earlier this month but failed to mention the deduction in its ensuing earnings statement or conference call with investors. Additionally, ING Groep NV placed US$5.6 billion of negative valuations in its capital account, while disclosing only an 80 million-euro depletion to income. Michael Holland, who oversees more than $4 billion as chairman of Holland & Co., remarks, "The smart people are the ones who've identified the problems, put them out there in full transparency, and addressed them by raising more capital. There is still billions of dollars of crap out there that hasn't worked itself through the system, [and] banks need more capital to work that all out.'' Janet Tavakoli, author of "Collateralized Debt Obligations & Structured Finance," adds that the bulk of the losses are permanent impairments caused by surging defaults on U.S. mortgages.