Looks like the Admin, Congress and the FASB have cross purposes. Now the banks have a real problem. Banks can't execute mortgage mods without adjusting the values (read losses) on their balance sheets.
Why, after arguing for banks to have more leeway, is Congress now pushing back? Because many government responses to the financial crisis are more about manipulating prices -- and behavior -- than truly getting markets back on their feet.
Dressing up bank balance sheets was a first-quarter political priority. Now there is a push to get banks to modify more troubled mortgages. That effort is being stymied by a rosy view taken by many banks of the value of home-equity loans and second-lien mortgages.
Many banks have marked down these loans only by 3 percent to 4 percent, said Paul Miller, bank analyst at Friedman Billings Ramsey & Co. These loans in many cases would likely fetch about 40 cents on the dollar if sold in today’s market.