The paper says banks are using a legal accounting trick to keep from reporting the write-downs on their income statements. It mentions Merrill Lynch, which last week took $6.6 billion in write-downs in the first quarter that resulted in a $1.9 billion loss. But the firm has another $3.1 billion in write-downs, too, but didn’t count those as a loss.

Analysts also are sounding the alarm that these losses may eventually come back to bite investors, even if they are presently tucked away in a little-noticed corner of the balance sheet. In a recent report, Credit Suisse analyst David Zion estimated that companies in the Standard & Poor’s 500-stock index were sitting on about $80 billion of these unrealized losses as of the end of last year.

After Merrill reported its results, Punk Ziegel & Co. analyst Richard X. Bove threw up his hands in frustration over the way corporate results were being masked by accounting practices, including the ability to book some losses in shareholders’ equity rather than profit.

“It would be disingenuous of me to indicate that I understood what has happened at Merrill Lynch in the first quarter or that I had any rational way to estimate what the company’s earnings are likely to be going forward,” Mr. Bove wrote in a note to clients.

Borrowers gone wild!

The Los Angeles Times has a problematic story that reports that insurance companies and cops say they’re seeing an increase in house and car fires allegedly set by people who can’t pay their debts. It’s another in a proliferating line of Crazed Borrower stories.

These financially motivated fires are surprising some officials because they come after a decade-long decline in overall arson rates nationwide. Few state or federal agencies categorize arson in terms of the financial status of liens on the property, making nationwide figures elusive. Still, pockets of the country are showing a significant increase.

Insurers referred 14 cases of questionable home fires, with foreclosure as a possible factor, to the California Department of Insurance last year, up from seven in 2006 and two in 2005. In the same three-year period, reports of auto arson increased by a third, to 343 cases last year. On Friday, the Department of Insurance announced the arrests of seven people in two investigations of possible automobile arson and insurance fraud.

Fourteen whole cases, huh?

In the current economic environment, the temptation to commit arson can be too much for some. There were 2.2 million foreclosures last year, up 75% from the previous year, according to RealtyTrac. In addition, a study by Moody’s and Equifax found that 4.5% of all mortgages were delinquent in the first quarter of 2008. Auto loan delinquencies hit a 10-year high in January.

Frank Scafidi of the National Insurance Crime Bureau, a membership organization that tracks insurance fraud, says his group has not identified a rise in financially motivated arson. “Everything we’ve found does not support that,” he said.

That’s interesting info buried in the sixteenth paragraph. The Times rationalizes it by quoting “observers” saying industry folks like Scafidi downplay the crimes so as not to inspire copycats.

Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at