The Stock Market was up Thursday but why? Many speculated the G20 conference proposal for heavier global bank regulation helped the market. What maybe the postive market trigger last Thursday was the FASB accounting rule change on how financial institutions value their assets. What does this have to do with the Fort Mill home market? Hold on let me explain.
Thursday FASB (Financial Accounting Standards Board) changed the market to market accounting rule that allows banks and other financial institutions more leeway on setting the value of their assets rather than valuing the assets at current market prices. The market seemed to like this news.
You may recall last year many banks had to value their mortgage backed securities at unpredicted lows and record huge book value losses because the market value of some mortgage baked securities were considered toxic and had little value. Banks had no choice but to book their mortgage backed securities at a loss even though their particular asset may not have been “toxic”.
I have been looking for a sign that some action, policy change, or event will help trigger a positive turnaround. Nothing I have seen or heard at this point has been the A-HA! The FASB market to market valuation policy change feels like an A-HA to me! The policy change goes into effect next quarter but it has plenty of criticism too. But I suspect the change to the market to market accounting rule will reduce the reported bank losses, which will:
Boost more confidence in the market and banks,
Eventually lead to more lending.
Help to boost business, create jobs and eventually more home buyers in the Fort Mill market.
Is this an A-Ha for you too?