FAS 157: Yawn

by StockJockey

Thursday, May 15, 2008 - 2:01 pm

The issues swirling around FAS 157, particularly as they impact the reported proftis for financial stocks, have been a hot topic for many months now.

Even the New York Times is getting on the band wagon:

Yet on Thursday, Blackstone executives followed scores of financial institutions in blaming the same three letters and numbers: FAS 157.

The acronym represents the “fair value rule” put into effect by the Federal Accounting Standards Board, requiring that certain holdings be marked to market. In Blackstone’s case, FAS 157 is applied to holdings like its private equity investments, which are valued as if they were to be sold on March 31.

Many banks have already suffered the sting of FAS 157. The rule, which went into effect Nov. 15, mandated that they mark down the values of holdings like mortgages and collateralized debt obligations, leading to huge write-downs and, in many cases losses. NYT

Of course, the Times is a little late with offering a FAS 157 primer. It might have been timely back in September, but the Times was busy running a rumor Warren Buffet was buying shares of Bear Stearns (BSC-NYSE), which rallied the stock to $120 and enabled the company to float a debt issue. They needed the capital, but the confusion spawned by the Times gave shareholders a golden opportunity to bail out, and shorts to fade the stock.

September 27th
Was the rumor that Warren Buffett is kicking the tires at Bear Stearns just a pathetic attempt to generate page views?

Perhaps those sleuths at the gray lady should spend some time doing a little book learnin’. Maybe they could read up on FAS 157 and get back to us. After all, November 15th looms large....A year ago the FASB issued Statement number 157, which provides guidance for using fair value to measure assets and liabilities, and should result in a consistent approach to valuing complicated instruments. You might not have a degree or interest in accounting, but you might have an interest in Bear Stearns’ stock and want to briefly peruse Level 3 exposure on Wall Street. 1440 Wall Street

The Grey Lady is 8 months behind the curve in bringing this issue up; Blackstone’s stock does not care today and neither does the BuySide. And while the deal market continues to thaw, I remain short Dealbook.

This is one example of why Rupert Murdoch is unlikely to lose any sleep over the competitive threat they pose.

While the Street is not entirely comfortable, analysts have had plenty of time to gird themselves from fallout over FAS 157, and the Times is a day late, and a dollar short.

FAS 157: This is No Rumor
1440 Wall Street

Blackstone: Blame the Accountants
NYT
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The content contained represent the opinions of 1440 Wall Street. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author. No Position BSC