SEC Loosens Accounting Rule Banks Blame for Crisis
The standard, also known as "mark to market," has led portfolios to plunge in recent months as banks affixed fire sale prices to their assets, a move that sometimes required them to raise still more capital to meet regulatory requirements. The measure also led to clashes between corporate executives and independent auditors over how low the markdowns should be forced to dip.
In a meeting last week, lobbyists for the American Bankers Association and the Financial Services Roundtable urged the Securities and Exchange Commission to suspend or relax the accounting provision. A similar advocacy effort continues on Capitol Hill, where lawmakers are reconsidering efforts to aid the financial industry after the House yesterday failed to pass a recovery plan. That bill also would have forced a re-evaluation of the "mark to market" accounting rules.
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I See They've Identified the Problem
accurately accounting for the value of these assets. So once again we've decided to create our own reality. That's worked so well in the past, I can't imagine it won't work this time.
And I can't help but wonder what the Government would think if I decided to simply change the way I accounted for my income to be taxed. The dollar is down, wages are flat, so maybe only half my income should be declared. There'd be a lot less disruption to my household that way.
"Do what you feel in your heart to be right -- for you'll be criticized anyway. You'll be damned if you do, and damned if you don't. " - Eleanor Roosevelt
Martin Feldstein on Charlie Rose tonight-Paulson Fix wont't work
--tried to write down some of the discussion:
Highly inflated house prices; unimaginable loan to value ratios which had never been seen before; then the securitization legerdemain brought us to this mess. Big Shit Pile, now ripening and seeping throughout the economy (my phrasing).
The Paulson Fix does not get us to a fix for the fundamental problem, which is the downward spiral of house prices. Since mortgages are no recourse loans, the creditor can take the house, but can't take anything else. Now 10 million homeowners owe more than the value of their mortgages--this will continue to push down house prices. It's the fear of many more foreclosures which is damaging the mortgage backed securities. Will take another 10-15% fall in prices. [My note: I've read elsewhere they will fall more than that.]
We need to find way it will not trigger more defaults and foreclosure. His idea: Mortgage replacement loans. Feds offer to let homeowners swap portion of their loan for lower interest rate loans. Would keep system more stable. Feds would have recourse for the part of the mortgage they take. Offer to anyone who holds a mortgage.--20% of outstanding loan up to $80K. Could borrow that at low cost from gov't. Homeowner has lower monthly rate--but can't do the jingle keys thing. Can't get away from the mortgage. It becomes a recourse loan--I didn't catch whether for Feds and creditor or just Feds.
Cost? It's just a swap of one asset for another--about same cost as the Paulson Fix (which wont' fix),about $700B, maybe more. But would take care of the underlying problem--and eventually would be repaid. There wld be IOU's from the mortgage owner. Feds have first dibs on repayment of that.
Can't see how Treasury can run reverse auctions, since there are so many different kinds of these securities, and there are so many highly impaired portfolios. Can't put insurance cost on the unknown. [Note: This has been pointed out by several critics of the Paulson Fix Is In.]
Feldstein has weakened confidence in regulators and rating agencies. We count on them to make sure banks have adequate capital and their assets are appropriate for large institutions. This was ignored a lot; rating agencies gave imprimateur of solidity to vapor assets (my words this clause--Anyone remember vaporware?). Need much better supervision; perhaps not need new regulations.
I'd love to ask him if this is criminal activity....
Thinks dereg allowing regular banks to do investment type banking was good thing. But, excesses have occurred (note the passive voice--who did the excessive acts? Looks like no fault to me).
~~~
Last segment of Rose has NYTimes reporter Andrew Sorkin and Mort Zuckerman. Both say they do not know if Paulson Fix will work--think it may not, but think something must be done.
Sorkin thought taking time to look at alternatives would be good, but worries about the LIBOR rate, which is at record levels. May freeze the credit markets and make things worse.
Sorkin says next presidency will one where new prez can have 4 years that do get better--or get worse. Heh. Wanna place any bets?
Sorkin says Morgan Stanley and Goldman Sachs are temporarily out of the woods. Will become less profitable institutions--can't leverage as highly with regulation. G-S was a mini (mini??) hedge fund.
I missed some good points--video should be up in a day or so. Don't know about transcripts--used to have them.
So, wait a minute...
... I, the taxpayer/buyer, am buying what the seller offers, and the seller gets to tell me what it's worth? It's really that simple?
[ ] Very tepidly voting for Obama [ ] ?????. [ ] Any mullah-sucking billionaire-teabagging torture-loving pus-encrusted spawn of Cthulhu, bless his (R) heart.
"First they ignore you, then they ridicule you, then they fight you, then you win." -- Mahatma Gandhi
Yes, It's That Simple
and if that's going to be the rule I believe it was nakedcapitalism (but it might've been somewhere lese) that pointed out everyone should get every last damned dime out of the stock market right now. As bad as the lying, cheating, thieving is now, this makes it worse because this makes it legal.
"Do what you feel in your heart to be right -- for you'll be criticized anyway. You'll be damned if you do, and damned if you don't. " - Eleanor Roosevelt
Italics tag needs fixing on SEC thread
Might be Lambert's comment?
Also, my first comment disappeared--I know it was there bcz I wrote second as a reply to my first comment. Whassup?
New Paulson Fix Is In includes this Enron Accounting, right?
This move from Mark-to-Market to Mark-to-MakeBelieve. And that makes the Dems complicit in encouraging Enron accounting? And lack of transparency? Which is what Paulson wanted from the git go in that 3 Page Bailout memo?
What a freakin' mess! The decay of the Big $hit Pile has invaded our Democratic Party! Or, at least the NuDems part of the Dems.
Maybe I will change my voter registration--I almost did after the hideous fake rules committee meeting and then their giving my vote for Hillary to Obama without even counting it as the convention. But, I couldn't quite do it.
Dems For Trickle Down Economics
Dems for Enron Accounting
Dems for Bailouts for the Big Banker Boiz
Dems for Business Tax Cuts While Indebting the General Tax Payers
Dems for BushCo??
And accepting the Paulson Fix Is In all bcz Paulson and Bernanke are Very Serious
People and the Dems can't listen to anyone outside the Village
Insder Loop. We need an opposition party to both R's and D's!
Al Hunt said we taxpayers, voters were "irrational." Well, the Dems are driving me mad! Angry mad.
Feldstein's proposal sounds like debt servitude to me
Making mortgages full-recourse; debtors' prison, here we come. Typical Rose guest though, ready to carve the heart out of the least to serve up to Paulsen, et al.
Elliot Lake