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Level III Assets Broken Down

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Taking a look at the major institutions and their Level III Assets...

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It's been an active day behind the scenes as we chew through the dew and sort it all out. It is worth mentioning that the discussion we had earlier regarding the November 15th FASB Rule 157 is picking up steam behind the scenes.

If we look at the major institutions and divide their Level III assets by their equity capital base, we arrive at the following calculations:

  • Citigroup: Equity base: $128 billion, Level III: $135 billion. Ratio: 105%
  • Goldman: $39 billion, Level III: $72 billion. Ratio: 185%.
  • Morgan Stanley: $35 billion. Level III: $88 billion. Ratio: 251%.
  • Bear Stearns: $13 billion. Level III: $20 billion. Ratio: 154%.
  • Merrill Lynch: $42 billion. Level III: $16 billion. Ratio: 38%.

Again, whether this "matters" remains to be seen. What I will offer, with some degree of certainty, is that Hank, Ben and the rest of the den are fully aware of this dynamic. That's likely why we saw such aggressive actions from global central banks and, to that end, why the Treasury is pushing the super-conduit emergency bailout plan.

So you know and so it's said, I spent some time today chewing through FASB documents with our Minyanville accountant (think "Dave" when Kevin Kline tried to balance the budget). The November 15th date isn't a drop dead reporting date, it's simply a date of implementation going forward regarding the recognition of fair value.

Many of these disclosures won't "hit" until next year although, according to a study he shared with me from Deloitte, only six percent of companies (across a wide range of industries) have assessed how FASB 157 will impact the valuation of their assets and liablity.

Stay tuned on this---it may not be near-term business (and it may get Fannie Maed away, so to speak) but it's at the heart of the mark-to-market matter.

R.P.


Holiday Festivus is here! Come join us and support the Ruby Peck Foundation For Children's Education at an old-fashioned Southern-style hoe-down in the heart of New York City on December 7th. Click the image below to learn more!

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No positions in stocks mentioned.

Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at todd@minyanville.com.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

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