The idea behind marking collateral to market is to maintain sound banking practices and keep well ahead of cyclical credit losses. It does little good to have banking rules if you abandon them when troubles emerge. In yet another bad precedent, according to ZeroHedge sources, the Dallas Fed has now done exactly that. It is reported to have met with the banks a week ago, and as a result no impairments are being written down.

The ZeroHedge article goes on to report, “Our source notes that having run the numbers, it looks like at least 18% of some banks commercial loan book are impaired, and that’s based on just applying the 3Q marks for public debt to their syndicate sums.”

The Dallas Fed is pushing the idea of asset sales rather than bankruptcy. Clearly this is a CONfession of serious trouble in the energy and energy-banking sector. But the energy business in the U.S. is highly dependent on debt for acquisitions and operations. Meanwhile, credit facility exposures are being rolled back for energy producers.

The ZeroHedge tweeted that the Dallas Fed denied the allegations. But the evidence suggests this is a disingenuous response and that mark-to-unicorn is the dishonest standard across the U.S. banking system, not just Dallas. For example, Bank of America just reported operational results that demonstrated a small increase in write offs and no increase in loss reserves. It’s a similar pattern elsewhere.

Chart source: Bank of America

Asset sales to stronger entities will be problematic unless new vultures with capital enter the fray. Freeport-McMoRan has yet to find a funding solution for its oil and gas business (including a sale) after searching for alternatives for more than a year.

The problem will be revealed if and when distressed asset transactions show up and observers realized just how underwater the energy debt matrix really is. Não combinam.

Clues as to what’s up may be offered by the choice of the new president of the Dallas Fed, Robert Steven Kaplan, who worked at Goldman Sachs for 22 years, rising to the rank of vice chairman of investment banking. We will see soon enough just how active the Cabal’s crews are in the matrix they just set up