…but remember, folks, you read it here first. Barron’s had the following:

HINTS OF ACCOUNTING CHANGE OFFER NEW RELIEF

 

Bank stocks erased recent losses on fresh talk the Obama Administration may be closer to realizing a compromise package of financial relief that would offer olive branches to a host of constituencies that seemed recently to be losing their ardor for the initiative. Highlights of the new package may - or then, may not, as details have been sketchy - include:

*a renewal of the ”bad bank” concept, in which the government would purchase troubled assets from banks, effectively ”ring-fencing” the toxic stuff that’s crippled balance sheets;

*government guarantees and insurance for other trouble assets

*some relief for underwater mortgage holders

*the prospective suspension of some accounting rules.

The last of those initiatives may seem like a purely mechanical move that would allow banks to sell the government some assets at prices that would be below what they’re carried on the books at right now, but could be the sole reason the market has rallied from its early losses.

 

The Dow industrial average, which had been down more than 100 points from the opening bell, has bounced back, jumping more than 100 points after talk of the new bailout initiative circulated on trading desks. While critics would say that suspending or eliminating mark-to-market accounting rules would hurt transparency, a number of observers who have bemoaned the fate of the banking sector have blamed those mark-to-market requirements as being a cause - rather than effect - of the current plight financials find themselves in.

 

Pricing of the toxic assets had been one of the biggest stumbling blocks to marshalling support for the latest round of financial services bailouts. Congressional leaders expressed concerns that, if the government purchased bad assets for anything approaching the values at which they’re carried on balance sheets, taxpayers would be over-paying for bad merchandise, while effectively rewarding banks for their previous mistakes. But paying only fire-sale prices for those same assets wouldn’t offer those banks enough incentive to enter a sale. The latest iteration of the plan, as it’s believed to be structured, would price the purchases somewhere in the middle of those two points.

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