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Banks May See Deal-Related Windfalls

Several major banks that completed big deals for falter competitors last year could reap windfalls produced by accounting rules governing recent deals for mortgage lenders.
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Several major banks that completed big deals for falter competitors last year could reap windfalls produced by accounting rules governing how they valued soured loan books they acquired, according to a published report.

JPMorgan Chase

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can see a $29 billion gain derived from the difference between the value of marked down loans acquired in its September deal for

Washington Mutual

and the cash flow they're expected to produce going forward, according to

Bloomberg

. The report notes that JPMorgan marked down WaMu's $118.2 billion loan book by 25% when it completed the deal for the failed thrift.

Wells Fargo

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,

Bank of America

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and

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PNC Financial Services

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also stand to benefit from the accounting rule, due to their respective purchases of

Wachovia

,

Countrywide

and

National City

,

Bloomberg

said. The deals can provide a combined $56 billion, the report said.

Purchase accounting rules allowed the banks to mark down loan books to very distressed levels reached amid the worst financial crisis since the Great Depression,

Bloomberg

said. But as borrowers pay debts, the banks can recover some of the lost value.

This article was written by a staff member of TheStreet.com.