Search results for: CECL

Here is something helpful that has surfaced amidst the fallout, pain and confusion of the global COVID-19 crisis.  The implementation date for the all-too-simple in theory but not-simple-at-all in practice CECL accounting standard has been pushed back by the passage of the CARES Act for banks until the COVID-19 national emergency declared by the president ends or December 31, 2020, whichever is earlier.  In addition, an interim final rule released by the FRB, OCC and FDIC on Friday, March 27th, now provides an option to delay the effects of CECL on regulatory capital for two years (in addition to the original three-year transition period for banks required to adopt CECL during their 2020 fiscal year).  Banks opting to use both forms of relief would be subject to a modified transition period which would be reduced by the amount of quarters CECL was delayed due to the CARES Act.  No relief was provided for non-banks who are otherwise required to follow CECL.
Continue Reading CECL: The Ugly Pig Running Out of Lipstick

Just a few short months ago we took on the breathtakingly ill-conceived Current Expected Credit Loss (CECL) standard that the Financial Accounting Standards Board (FASB) proposed to implement starting in 2020.  CECL will require major shifts in the way lenders model, forecast and reserve for future losses.  It would materially drive up capital requirements, impair earnings and ultimately drive spreads higher to the borrowing community.  And by the way, it would be pro-cyclical.  If we were actually going to do these things (and we shouldn’t), an unelected financial standard setting committee is surely the wrong party to hold the pen.

The lending community screamed bloody murder, and for good reason.  Luckily, the small banking community was at the forefront on this cri de coeur.  While the money center banks may be one of our pols’ favorite whipping boys, everyone in politics loves the small banker (visions of Jimmy Stewart dancing in their reptilian brains) because those bankers made loans to their constituents, support their local community and, oh, by the way, made significant political contributions.Continue Reading Beany & CECL – Episode 2

Beany & Cecil was a cartoon.  The Current Expected Credit Loss accounting rules, better known as CECL, which the FASB is insisting will go into effect at the beginning of next year for publicly traded banks and lenders and a year later for all other GAAP reporting entities is not.  Now, heaven forfend that I suggest that the work of the Financial Accounting Standards Board is cartoonish, but there’s a parallel in this pairing of harmless and obscured menace worth noting. 
Continue Reading Beany & CECL

Several weeks ago, I wrote a commentary called Funny Times in which I bemoaned the complete lack of coherent data, making the process of predicting the course of interest rates, cap rates and transactional velocity over the next couple of quarters awfully hard.  This uncertainty, itself, contributes to a knock-on doom cycle sort of way…

What funny times in which we live; an observation perhaps highly dependent upon your notion of fun.  Maybe curious is the better description.  Daunting?  Frightening?  Opaque and unknowable?  All probably good descriptions.  True of politics.  True of business. 

Sticking to business, it’s hard to get conviction around anything right now.  Nonetheless, we must.  Everyone needs…

Well, it’s been an interesting week and a bit. First Silicon Valley Bank and Signature Bank were closed by their respective State banking authorities with the FDIC stepping in as receiver and then the extraordinary action by the Fed and Treasury to address liquidity concerns and a bunch of rather disingenuous assurances from the great and…

I wrote a week or two back about my expectation that significant economic dislocation awaits us.  I still think that.  The morning after I published, hordes (ok, maybe not hordes) of PhD Villeins were outside my house with pitchforks and burning torches, loudly asserting that I had wildly overstated the likelihood of material distress in the marketplace.  “No, no, no, the White House has assured us of a soft landing and a soft landing we’ll have.”  (The Council of Economic Advisers, not surprisingly, if professionally embarrassing, seem to think so, too.)  And, while inflation is bad, it’s not that bad.  (I don’t yet need a wheel barrel to buy bread!)  No recession, they perorate loudly and insistently.  We’ll be back to 2% inflation, sub 4% unemployment and 2% GNP growth by Q4 of 2023!
Continue Reading Life (and Opportunity) in the Time of Considerable Government Malfeasance

As I was saying in my last commentary, it’s time to stay calm and carry on in a market that is flashing green, red and yellow signals simultaneously.  These are market conditions in which nimbleness will be rewarded.  Whether the economy is going to continue to grow, albeit in a very low gear, or whether we’re going to have a recession of one species or another, things are not soon going to return to the BEFORE.
Continue Reading Get Ready for the Distressed Debt Wave (HONEST!)

It’s coming up on awards season.  The Emmys were last week and weirdly, I got a thought bubble about nominees in the Black Swan category, walking the red carpet looking for attention!  Think the Masquerade scene from Phantom of the Opera when the Phantom comes prancing down the stairs to harsh the festivities (at least he sang well).  

We have some obvious nominees today.  But are they the real thing?  Will they move markets?  We have, with some reason, become inured to the disruptive headlines howling about threats to our way of life.  Is there simply too much chaos out there to pick out the things which are really relevant from the noise?  Our 24-hour news cycle is hardly helpful, is it?  The talking heads, with practiced expressions of concern, seriousness of purpose and faux competence, serve up our daily quantum of fear and distress (Film at 11!).  Don’t they seem almost gleeful to report yet another potential disaster?  With breathy anxiety, designed to tug at our atavistic fight or flight instincts, they repurpose as news exaggeration, hyperbole, vague allegations, unconfirmed reports and sheer speculation.

The scary part is, of course, that buried and obscured in all that noise might be real news, things that investors and market participants really ought to be paying attention to because they will matter.  The trick is sussing out the stuff that matters from the stuff that doesn’t.

So, we really do need to take into account these aspirational swans.  One of them could be that figurative dead archduke.

Let’s take a stroll along the red carpet and chat up some of these swans.Continue Reading Does A Red Carpet Full Of Black Swans Matter?

The New Year is already proving to be a busy one. A new Congress, new COVID-19 strains and vaccine promises, and a new stimulus package making its way to American citizens and businesses. The Coronavirus Response and Relief Supplemental Appropriations Act, 2021 was signed into law just before the New Year. And while the $600 checks being sent directly to the American people and the extension of additional unemployment benefits seems to have captured the national attention, the $900 billion relief package will provide support to much more than the personal pocketbook.
Continue Reading Highlights Of The Latest COVID-19 Relief Bill