Numbers Can Lie!

Some of you know that when I’m not blogging here or down in my secret laboratory breeding sexy vampire robots, I’m a wage slave in an accounting department. Now, I am the world’s most badass accountant, but I am still an accountant and so I sometimes have to have conversations like, “Is that offset supposed to show as taxable income on the 1099 even though it only pays off liability?”

So the other day I was talking to my Accounting boss (I also have an Operations boss, but that’s another story) and he said that he had been talking with some of his accountant-type friends (this is already the most boring blog post you’re ever read, right?) and they got on the topic of the big bank bailout last year.

Now I should pause here to say that I’m a lefty liberal and that I would have no problem living in a socialist country if only because I believe in the single-payer healthcare model and that guns are a public health risk, but even I had a few problems with the way that the whole bailout went down, though I do think that it was absolutely necessary (anyone who says otherwise has no idea what the hell they are talking about). Anywhoo …

My boss told me that he was told that the reason that all of these banks were able to “recover” so quickly is because their books were not as bad as it initially seemed at first glance.

“But, huh?” you say.

We all heard about how much money was lost on all of these stupid mortgages, right? Basically the whole collapse boiled down to illogical mortgages that people couldn’t pay. Well that is kinda true, but the interesting thing is that lots of these banks did some cutesy accounting when it came time to ask for handouts.

Here’s what they (allegedly) did:

If your mortgage was $1 million and you paid off $900,000 and then you defaulted and walked away, instead of posting a $100,000 loss, the banks wrote off the whole damn thing as a bad mortgage and posted a $1 million loss.

Does that make sense? I give you ten bucks, you pay me back nine and then tell me to screw off, so I go to your mom and say that you owe me ten bucks because you never actually paid back the ten bucks.

This is when you say, “No fucking way?’

And I – the world’s most badass accountant – says, “Wouldn’t surprise me.”

Now I am not accusing anybody of anything, I’m just spreading gossip because it’s fun, but I am aware enough of the way that money gets accounted for that it wouldn’t surprise me at all if this were true. Huge companies like the banks that we’re taking about are dealing with SO MUCH MONEY that the ways they have to keep track of it don’t make any sense at all to the rest of us who don’t have flying cars and swimming pools heated by the warm tears of orphans.

The number of holding accounts and clearing accounts and escrow accounts that can become involved in these sorts of mortgages would knock your socks off. Actually and literally, your socks would fly off. That kind of accounting can be done on such a massive scale that I think it is entirely possible that this hearsay is completely true. It would basically just mean that you don’t show any of a mortgage as paid until the entire mortgage is paid. That $900,000 just sits in a little piggy bank somewhere until it adds up to $1 millions, but until it does, it is entirely unconnected. Anybody who has ever used Quickbooks or taken an accounting class knows that you have to apply a credit to a debit, it doesn't just happen. And (according to thses rumors anyway) it didn't.

So, I just thought that I would share that with you because it has been bugging me lately (although I’m also kind of secretly impressed).


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