Professor William Black:

The generally accepted accounting principles, GAAP, rule is that at the time you are making the loans - immediately, in other words - you have to establish loss reserves that are appropriate for the risk you are taking. If you are not underwriting a loan and making it to people with ultra-concentration and such, you have to immediately establish much larger loss reserves. If you had established appropriate loss reserves, the accounting would have shown from day one that the loan was actually a loss.