A Conundrum

Bank of America and Citicorp reported profits. Bank of America said, “Non interest income included $2.2 billion in gains related to mark-to-market adjustments on certain Merrill Lynch structured notes as a result of credit spreads widening.” The translation—The market is more doubtful of our ability to pay our loan. Therefore the loan has decreased in value. Voila, we can report profits on that decrease in value.

So, how about the homeowners? It’s more doubtful that they’ll be able to pay off their loan. Do you think the bank will decrease the value of the loan? “What’s sauce for the goose is sauce for the gander.”