When bad loansdo good: JPMorgan could reap $29b

JPMorgan Chase & Co stands to reap a $29 billion windfall thanks to an accounting rule that lets the second-biggest US bank transform bad loans it purchased from Washington Mutual Inc into income.

Wells Fargo & Co, Bank of America Corp and PNC Financial Services Group Inc are also poised to benefit from taking over home lenders Wachovia Corp, Countrywide Financial Corp and National City Corp, regulatory filings show. The deals provide a total of $56 billion in so-called accretable yield, the difference between the value of the loans on the banks' balance sheets and the cash flow they're expected to produce.

Faced with the highest US unemployment in 25 years and a surging foreclosure rate, the lenders are seizing on a four-year-old rule aimed at standardizing how they book acquired loans that have deteriorated in credit quality. By applying the measure to mortgages and commercial loans that lost value during the worst financial crisis since the Great Depression, the banks will wring revenue from the wreckage, said Robert Willens, a former Lehman Brothers Holdings Inc executive who runs a tax and accounting consulting firm in New York.