It reduces our earnings when we make the loans by setting aside reserves at the start. If we followed the practice of some other issuers, we would not set aside up-front credit reserves and would therefore report higher earnings during the quarter in which the loans were originated. Of course, as I said earlier, the subsequent gain on any loan sale would be proportionally smaller. The overall benefits we realize from such loan sales are similar to those of other card issuers. We recognize those benefits later than some issuers do, but we disclose a great deal of information to enable investors to evaluate the impact and timing on our card business.
Most investors see securitization as an attractive means to diversify funding sources.
Some observers may wish that securitization was not allowed, but there is nothing wrong with the process or the results if reported fully, as required, and as we do it. The implication is that we made 'rosier assumptions' in order to increase current-period earnings at the risk of reducing future earnings. Again, the facts are different from the assertion and the implication. All companies that sell variable annuity and insurance products are required to defer and amortize the costs of acquiring new business. The amortization schedule must be adjusted periodically to reflect changes in those factors.