RESERVE REVERSALS DO TO COUNT AS REAL EARNINGS

Bob McTeer, a skeptic of mark-to-market accounting, takes a victory lap following the FASB’s decision this week-than adds this observation.

An important postscript to the M2M saga is that having had to over-reserve for losses not likely to occur, many banks are now able to reduce provisions for losses, boosting their profits. Unfortunately, investors that didn’t understand the earlier over-reserving are suspicious that there is something fishy about the reversal-making some bank stocks the buy of the decade.

Banks are “the buy of the decade.” I like the sound of that. . . . McTeer is of course right to point out that bank earnings derived from reserve reversals are totally legit-regardless of what so many analysts, who ought to know better, are lately saying. . . .