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FASB Bends Over For The Final Time & Accuracy In Financial Reporting Dies An Ignominious Death, Proving Ignorance IsTruly Bliss With Other People's Money!!!
- Balance Sheet Recession
- Bank Failures
- Barney Frank
- Commercial Real Estate
- CRE
- CRE
- Financial Accounting Standards Board
- Financial Crisis Inquiry Commission
- Financial Regulation
- goldman sachs
- Goldman Sachs
- Great Depression
- Irrational Exuberance
- Japan
- Lehman
- Lehman Brothers
- Mark To Market
- Milton Friedman
- Netherlands
- Nomura
- None
- NPAs
- Real estate
- Reality
- Recession
- TARP
This is my response to an inciteful insightful comment posted by BoomBustBlogger GJK313. It is in reference to an article which readers can find here, titled “FASB Surrenders – America Win”. I suggest readers read the aforelinked document in its entirety before moving on. Notice
how this is written by economists and analysts, not real world
investors that are investing THEIR OWN CAPITAL! When I state “own
capital” I mean their money, and not that of their clients. I cannot
fathom how anyone who had their own money at stake would ever want more
ambiguity in pricing assets, in lieu of less.. Let me pick this apart…
“Somehow it believes
that marking everything to market (even when that market is illiquid)
will somehow make the world a better and safer place”
that marking everything to market (even when that market is illiquid)
will somehow make the world a better and safer place”
Well, when the market is illiquid, the assets in said market have a lower market value. It really is that simple.
“Somehow it believes that marking
everything to market (even when that market is illiquid) will somehow
make the world a better and safer place”
everything to market (even when that market is illiquid) will somehow
make the world a better and safer place”
Yes, because if said banks had to liquidate their loans the only place to liquidate them would be said “illiquid” market. This goes to show you how the value of the loans are probably highly overstated by those such as the authors of this article. Guarantee me that no bank will ever go bust again – guarantee me that no bank will never, ever need to sell assets, and I will soften my stance some on mark to market accounting. Until then…
“banks will be allowed to carry
loans on their books at amortized cost, reflecting cash flow (payments),
as well as reasonable estimates of likely loan losses.”
loans on their books at amortized cost, reflecting cash flow (payments),
as well as reasonable estimates of likely loan losses.”
This should now mean that the price of all unsecured loans should
drop immediately and dramatically for all consumers, for FASB and these
authors are not differentiating between loans backed by collateral and
loans not backed by collateral. Many formerly overcollateralized real
estate loans are now partially or fully unsecured due to the collapse of
real estate “Values” and “Prices” (yes, there is a difference).
They are also not taking into consideration the financial and strategic
advantages of defaulting on a loan against an asset with negative
equity. So, if the banks can now benefit from pricing loans at will (as
the authors stated, “reasonable estimates of likely loan losses”
– who will make these estimates?), regardless of collateral, why
shouldn’t that benefit be passed onto the consumer and allow them to
enjoy said valuation/pricing perks. Picture me going to a bank and
saying, “Just loan me $4 million with nothing hard to back
it for no more than you charge that guy with a 40% overcollateralized
loan. You can’t charge me more since I will keep my payments current and
you will be able to make a “reasonable estimate” of the losses, of
which of course there will be none because…. Well, just because!“
drop immediately and dramatically for all consumers, for FASB and these
authors are not differentiating between loans backed by collateral and
loans not backed by collateral. Many formerly overcollateralized real
estate loans are now partially or fully unsecured due to the collapse of
real estate “Values” and “Prices” (yes, there is a difference).
They are also not taking into consideration the financial and strategic
advantages of defaulting on a loan against an asset with negative
equity. So, if the banks can now benefit from pricing loans at will (as
the authors stated, “reasonable estimates of likely loan losses”
– who will make these estimates?), regardless of collateral, why
shouldn’t that benefit be passed onto the consumer and allow them to
enjoy said valuation/pricing perks. Picture me going to a bank and
saying, “Just loan me $4 million with nothing hard to back
it for no more than you charge that guy with a 40% overcollateralized
loan. You can’t charge me more since I will keep my payments current and
you will be able to make a “reasonable estimate” of the losses, of
which of course there will be none because…. Well, just because!“
Does this scenario make any sense to you?
“Like the sword of Damacles,
mark-to-market accounting has been hanging over the head of the economy.
As long as it could be broadened, or brought back in the form it took
in 2008, the risk of turning the next recession into a panic or even a
depression was very real.“
mark-to-market accounting has been hanging over the head of the economy.
As long as it could be broadened, or brought back in the form it took
in 2008, the risk of turning the next recession into a panic or even a
depression was very real.“
Nonsense and rubbish. If mark to market would have been implemented
faithfully, the last crash would not have been asset based for the
bank/developer/investor assets would have had the clarity of valuation
that would have prevented the FUD (fear, uncertainty, and doubt) that
surprised the banks (and their investors/insurers/stakeholders) and
caused them to collapse in mid air. Notice how absolutely NO ONE was complaining about M2M between 2003 and 2007 when asset prices were flying through the roof! When the market started turning, banks wanted to keep their marks at the elevated BUBBLE prices and actually won the right to do so through regulatory capture – see About the Politically Malleable FASB, Paid for Politicians, and Mark to Myth Accounting Rules. The US banking system is now built upon one giant LIE! Reference More on Lehman Brothers Dies While Getting Away with Murder: Introducing Regulatory Capture.
faithfully, the last crash would not have been asset based for the
bank/developer/investor assets would have had the clarity of valuation
that would have prevented the FUD (fear, uncertainty, and doubt) that
surprised the banks (and their investors/insurers/stakeholders) and
caused them to collapse in mid air. Notice how absolutely NO ONE was complaining about M2M between 2003 and 2007 when asset prices were flying through the roof! When the market started turning, banks wanted to keep their marks at the elevated BUBBLE prices and actually won the right to do so through regulatory capture – see About the Politically Malleable FASB, Paid for Politicians, and Mark to Myth Accounting Rules. The US banking system is now built upon one giant LIE! Reference More on Lehman Brothers Dies While Getting Away with Murder: Introducing Regulatory Capture.
“According to Milton
Friedman (in his book The Great Contraction), fair value accounting was
the predominant force for bank closures in the early stages of the
Depression. These bank failures fed on themselves making the Depression
worse.”
Friedman (in his book The Great Contraction), fair value accounting was
the predominant force for bank closures in the early stages of the
Depression. These bank failures fed on themselves making the Depression
worse.”
Oh, okay. It’s good to learn that. I thought it was irrational
exuberance, greed, and a run up of prices unfounded by the fundamentals.
exuberance, greed, and a run up of prices unfounded by the fundamentals.
“There is absolutely no academic research on the role of MTM accounting in the Great Depression”
‘Nuff said! The authors seem to be either be lacking in credibility
due to an obvious agenda or incapable of seeing the facts. Check this
out…
due to an obvious agenda or incapable of seeing the facts. Check this
out…
“Nothing has changed. Back in 2009,
Congress passed the Dodd-Frank financial regulation bill based on a
flimsy theory of the crisis’s causes even before the report from The
Financial Crisis Inquiry Commission. But that report would not have
changed much policy anyway. On January 24, 2011 – the same week as
FASB’s surrender – the FCIC said that the debacle was caused by a
combination of stupid and unscrupulous business practices mixed with lax
oversight by regulators. No surprise there”
Congress passed the Dodd-Frank financial regulation bill based on a
flimsy theory of the crisis’s causes even before the report from The
Financial Crisis Inquiry Commission. But that report would not have
changed much policy anyway. On January 24, 2011 – the same week as
FASB’s surrender – the FCIC said that the debacle was caused by a
combination of stupid and unscrupulous business practices mixed with lax
oversight by regulators. No surprise there”
Well, if M2M was adhered to and enforced, those business practices
labeled as stupid would not have been profitable hence would not have
been pursued – if pursued would have resulted in said institutions going
out of business BEFORE they destroyed the economy!
If banks were forced to retain the risk of loans that were written and
that risk was regularly and accurate marked to market, any “stupid and
unscrupulous business practices” would have resulted in the market
putting said operations out of business and thus there would not have
been as much of an effect from “lax oversight by regulators”. You see,
it really is that simple. I was able to witness much of this foolishness
first hand as an investor. The only reason the banks through out money
the way they did was because it wasn’t their money they were throwing
out, it was their naive investor’s monies. Investors who didn’t believe
in ardent marking to market, obviously. If the collateral was properly
vetted and marked, and the banks were forced to retain sizable risk, the
pain would have been to great to push the bubble to anywhere near the
heights it attained. Any institution that would have tried either would
not have had access to the funding at a profitable rate, or would have
simply been pushed out of business. Let the market work, don’t just let it work when the prices are going up.
labeled as stupid would not have been profitable hence would not have
been pursued – if pursued would have resulted in said institutions going
out of business BEFORE they destroyed the economy!
If banks were forced to retain the risk of loans that were written and
that risk was regularly and accurate marked to market, any “stupid and
unscrupulous business practices” would have resulted in the market
putting said operations out of business and thus there would not have
been as much of an effect from “lax oversight by regulators”. You see,
it really is that simple. I was able to witness much of this foolishness
first hand as an investor. The only reason the banks through out money
the way they did was because it wasn’t their money they were throwing
out, it was their naive investor’s monies. Investors who didn’t believe
in ardent marking to market, obviously. If the collateral was properly
vetted and marked, and the banks were forced to retain sizable risk, the
pain would have been to great to push the bubble to anywhere near the
heights it attained. Any institution that would have tried either would
not have had access to the funding at a profitable rate, or would have
simply been pushed out of business. Let the market work, don’t just let it work when the prices are going up.
“It was on March 9,
2009 that Barney Frank’s committee announced a hearing on fair value
accounting. FASB was brought to the table and forced to correct its
misguided rule”
2009 that Barney Frank’s committee announced a hearing on fair value
accounting. FASB was brought to the table and forced to correct its
misguided rule”
This says it all. Politicians are forcing accountants to do things
their way. After all, how in the hell will accountants know as much
about accounting as professional politicians such as Barney Frank
do???!!!
their way. After all, how in the hell will accountants know as much
about accounting as professional politicians such as Barney Frank
do???!!!
“The stock market bottomed on that
day and has virtually doubled since then. The recession was not ended by
stimulus, TARP, regulations, PPIP, or any of the other alphabet soup
government programs. It was ended by the correction of mark-to-market
accounting. The risk of another Depression ended on that day and the
economy and market have done nothing but move higher ever since.”
day and has virtually doubled since then. The recession was not ended by
stimulus, TARP, regulations, PPIP, or any of the other alphabet soup
government programs. It was ended by the correction of mark-to-market
accounting. The risk of another Depression ended on that day and the
economy and market have done nothing but move higher ever since.”
Actually, the guarantee of reality catching up with the fantasy
that was codified into regulation has been firmly entrenched. The
authors are making the same error that many ivory tower and investors
lacking in objectivity make, and that is assuming that the market prices necessarily and accurately reflect value. This is also a circular
argument, because if the authors really had that much faith in the
movement of the markets, why in the world would they argue against the
markets pricing bank assets???
Again, and you will see this often, many pundits believe the market is
right when it is going up, but it is dead wrong when it is going down. The
Fed, Barney Frank, et. al., and the Treasury colluded to lift the
prices of equities, real assets. government bonds, and the derivatives
based upon them to considerably above their fundamental values in an
attempt to reflate the bubble and pull the country out of recession the
“stanky” way.
that was codified into regulation has been firmly entrenched. The
authors are making the same error that many ivory tower and investors
lacking in objectivity make, and that is assuming that the market prices necessarily and accurately reflect value. This is also a circular
argument, because if the authors really had that much faith in the
movement of the markets, why in the world would they argue against the
markets pricing bank assets???
Again, and you will see this often, many pundits believe the market is
right when it is going up, but it is dead wrong when it is going down. The
Fed, Barney Frank, et. al., and the Treasury colluded to lift the
prices of equities, real assets. government bonds, and the derivatives
based upon them to considerably above their fundamental values in an
attempt to reflate the bubble and pull the country out of recession the
“stanky” way.
A natural result of this is that banks can easily hide the true condition of their holdings from most investors. Reference The Financial Times Vindicates BoomBustBlog’s Stance On Goldman Sachs – Once Again! wherein I detailed this occurrence:
I
declared insolvency throughout the banking system, and it looked as if I
was wrong for some time, then the truth’s ugly head started peaking
out. See The Financial Times Vindicates BoomBustBlog’s Stance On Goldman Sachs – Once Again!
Goldman Sachs
has revealed details of about $5bn in investment losses suffered during
the crisis for the first time this week, in a move that will deepen the
debate over companies’ financial disclosures. The figures, issued as
part of internal reforms aimed at silencing Goldman’s critics, show that the
bank suffered $13.5bn in losses from “investing and lending” with its
own funds in 2008. But Goldman’s regulatory filings and its executives’
comments to investors at the time pointed to about $8.5bn of losses
arising from its investments in debt and equity, as markets were rocked by the turmoil.
Hmmmm! I walked through this in explicit detail in “When the Patina Fades… The Rise and Fall of Goldman Sachs???“
and I did it without being privvy to Goldman’s financial innards. Long
story short, practically all of the major banks are lying about the
value of some of the largest assets on their books.
How
many institutional and/or retail investors will be able to ferret out
such? Or more importantly, why should they have to? It is the reporting
company’s responsibility to report, not to obfuscate.
The big problem with this “hide the market marks” thing is that markets tend to revert to mean. Unless
said market values fundamentally catch up with said market prices, you
will get a snapback. That is what is happening in residential real
estate now. That is what happened in Japan over the last 21 years!!!
That’s right, it wasn’t a lost decade in Japan, it was a lost 2.1
decades!
said market values fundamentally catch up with said market prices, you
will get a snapback. That is what is happening in residential real
estate now. That is what happened in Japan over the last 21 years!!!
That’s right, it wasn’t a lost decade in Japan, it was a lost 2.1
decades!
This has been the first balance sheet recession that the US has
ever had, but there is precedence to follow. Japan had a balance sheet
recession following their gigantic real asset bust. They made a slew of
fiscal and policy errors, which essentially prolonged their real asset
recession (now officially a depression) for T-W-E-N-T-Y O-N-E long years! For those that may have a problem reading that, it is 21 long years. What did the Japanese do wrong?
ever had, but there is precedence to follow. Japan had a balance sheet
recession following their gigantic real asset bust. They made a slew of
fiscal and policy errors, which essentially prolonged their real asset
recession (now officially a depression) for T-W-E-N-T-Y O-N-E long years! For those that may have a problem reading that, it is 21 long years. What did the Japanese do wrong?
- They refused to mark assets to market
- They attempted to prop up zombie banks
- They failed to promptly clean up NPAs in the banking system
- They looked the other way in regards to real estate value shenanigans
What was the result? Let’s reference Bad CRE, Rotten Home Loans, and the End of US Banking Prominence?
Now,
for those of you who believe that the government’s “pretend and extend”
policy has any chance in hell of working, or better yet, that we are
not following in the footsteps of Japan, let’s take a pictorial trip
through recent history. There are nearly no Japanese banks in the top 20
bank category on a global basis by 2003 – NONE (save potentially
Nomura, which arguably survived in name, alone). As you can see, they
literally dominated 90% of the space in 1990!
Click to enlarge…
Source: Cap Gemini Banking M&A
Now, cross reference this chart with the graph immediately above it paying very close attention to the respective years in question. I should be able to stop this post at this point, for if you haven’t gotten the message by now – you just ain’t gonna get it.
“With FASB finally giving in on the
issue for good, the future looks a lot brighter than most people
suspect. The accounting rule fell, it has been ignored by most, but the
impact of that fall is very good for America.”
issue for good, the future looks a lot brighter than most people
suspect. The accounting rule fell, it has been ignored by most, but the
impact of that fall is very good for America.”
Well, its good for those astute and capable
individual investors who can parse balance sheets and value assets on
their own. Its an insult, slap in the face, and condemnation to a
perpetual guessing game, Ponzi scheme and virtual casino for the average
individual and institutional investor. Unless we want to read about
this for practically all financial institutions that you risk putting
your life savings in…
individual investors who can parse balance sheets and value assets on
their own. Its an insult, slap in the face, and condemnation to a
perpetual guessing game, Ponzi scheme and virtual casino for the average
individual and institutional investor. Unless we want to read about
this for practically all financial institutions that you risk putting
your life savings in…
Goldman Sachs
has revealed details of about $5bn in investment losses suffered during
the crisis for the first time this week, in a move that will deepen the
debate over companies’ financial disclosures. The figures, issued as
part of internal reforms aimed at silencing Goldman’s critics, show that the
bank suffered $13.5bn in losses from “investing and lending” with its
own funds in 2008. But Goldman’s regulatory filings and its executives’
comments to investors at the time pointed to about $8.5bn of losses
arising from its investments in debt and equity, as markets were rocked by the turmoil.
has revealed details of about $5bn in investment losses suffered during
the crisis for the first time this week, in a move that will deepen the
debate over companies’ financial disclosures. The figures, issued as
part of internal reforms aimed at silencing Goldman’s critics, show that the
bank suffered $13.5bn in losses from “investing and lending” with its
own funds in 2008. But Goldman’s regulatory filings and its executives’
comments to investors at the time pointed to about $8.5bn of losses
arising from its investments in debt and equity, as markets were rocked by the turmoil.
Interested readers can follow me on twitter, peruse my Residential Real Estate postings and/or my Commercial Real Estate
opinion and research. I will be lecturing on this “realistic” viewpoint
of real asset valuation and the outlook for 2011 as the keynote speaker
in both New Amsterdam (Harlem, NY) on Thursday February 10th, and
Amsterdam (the Netherlands) on April 8th.
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So the tide is out and we can all plainly see that the king has no clothes. Now what? Does anyone really think anything will change? Nice piece, Reggie.
When I started to read the First Trust paper, I was laughing, so sure I would find the logo of The Onion at the bottom of the pages.
When I realized there were no logos anywhere, I started to cry.
Now, like Dr_Dazed said: ready to join the mob who shall pillory the FASB basturds.
Come now, we should all stop whining here.
As a CPA and owner with a large audit practice said to me recently when I complained of M2M manipulation at the FASB national level, "its just about politics."
CPA's like their brethern, economists, academics and statisticians, really do know best. After all, FASB leadership and the partnership level at most audit firms have our best interests at heart.
As for the current administration - No worries. As long as he has political cover by the "professions" - why should he upset the apple cart. You cant get political donations when there are no apples to sell.
The problem with Audit Partners at any large firm is that they do not understand the business and therefore have no way to identify the risks to the business.
"its just about politics."
Sure it is, at least until people need to extract REAL buying power from their assets in order to survive or pay for real commodities they need to do business. People seem to still believe in unicorns, hence "mark to unicorn" accounting works. Going to get ugly when people ask for their equity share in unicorns only to find out there aren't any.
It really is time for an entirely new economic model folks.
Kicking, crying, moaning, vomiting, whining,........
Whatever.
Learn to say, "May I lick your boots?" In Mandarin.
So - why would I expect a couple of bank stooges to come up with anything else? It's hard to get worked up over their analysis - that's what they do for a living. Now if you want to pillory the gutless bastards on FASB, I'll join that mob.
The word, "integrity" should be dropped from the English speaking dictionaries.
dumping mark to market, pumping their stocks up and loaning to them almost interest free all to hide reality, perpetuate false confidence and allow the banks to recapitalize at the expense of everything and everyone on the planet-good ole democracy at its best!
I have, for some time now, been under the impression that the strategy being employed by the banks/fed/government is to devalue the dollar until it is so devalued that the fantasy pricing of the bank assets becomes reality by mere virtue of inflation. Hence the reason for the Ben Bernank to only ever quote the "core inflation rate" which is (if I'm not mistaken) weighted 40soething percent in housing.
Oh course I could be totally off the mark here...I'm shooting from the hip.
"Hence the reason for the Ben Bernank to only ever quote the "core inflation rate" which is (if I'm not mistaken) weighted 40soething percent in housing."
Sounds spot on to me, govt picks DEflating asset classes to compute "core inflation".
Seems a SPOT on analysis to me!
I don't understand how in the "mania" phase of the bubble, Mark-to-market doesn't make valuation and mis-allocation of capital much worse, and allow for even faster bubble-blowing. It seems that under mark-to-market you get fairer values going down, but, a higher chance of overstatement on the way up. This was my main and only objection to MTM. FASB leadership has been weak for the last ten years, note the convergence project failures.
I agree.
Economies are Full of double standards, deceit and fraud from Corporates to Countries.
I do not know how anyone thinks any investor will risk money when the moral hazard of the Bernank put is gone.
They said "free markets" for decades.
What free market? The FED has been tampering with the value of money in time and risk, the fed is the most twisted organization in world's history.
The economy is a big falacy.
The correct answer is somewhere between the original FASB 157 rule and fantasy. I cannot see banks being forced to value all of their loans based on the worst, and having to adjust reserves accordingly, to cover illiquid properties - this is what caused the original meltdown in 2008.
A bank where people keep their personal savings should be capitalized for a "worst case scenario" in order to protect the money of the depositors.
A hedge fund could take more risks. And when someone puts their money into a hedge fund they understand there are risks.
I don't want any banks gambling with my money. And if they do gamble with it, I want immunity from their bets. Banks should be held to the highest standard possible. Living up to those standards is what should make them eligible for FDIC insurance. Failure to adhere to those standards should render them unworthy of FDIC insurance.
just my two cents.
I understand where you are coming from, but in reality there is no risk-free investment. With the cost of capital what it is, most interest these days is risk premium. Of course, I would prefer there be no FDIC insurance either.
And there lay the problem: I DO NOT want the banks to use MY SAVINGS to fund THEIR GAMBLING.
If it must be that they can gamble with my money and when they win the keep the proceeds and when they lose I lose my savings...then tell me...why the fuck would anyone ever put a single penny into a savings account at a bank?
(PS: don't take my cursing as a sign of aggression...it's just the way I write/think/talk)
No offense taken. And I never keep a dime of my savings in a bank, as I agree with your second paragraph.
Did you ever notice how the biggest cheerleaders for capitalism and "freemarkets" are never in favor of market discipline (i.e. losses)? We have created "fairytale capitalism" here and now. My assets always go up and stupidity can be profitable - if you have the right connections. Geez - even in the feudal era idiots lost. What a world...
Exactly JustACitizen, that´s why the (Politicians and Bankers) all called it the Goldilocks economy!
Thanks, Reggie... I think. Truth hurts, eh?
RR
A friend sent me this photo of you waking up Monday morning after the Super Bowl.
Aren't you getting a little too old for this? :>)
You're just jealous. I didn't have to do any cleaning up after the festivities.
LOL
I'm jealous because at my age it takes me three days to recover. It's obvious that after you pulled that Coors Light can out of your butt you were ready to go. :>)
How do I go about changing the rules for mysaelf. You know, call my debts assets, get out of paying any taxes on my profits, moving my losses off-balance sheet in to a special purpose account....you know....annoying little stuff like that.
I've considered trying it, but somehow I feel the IRS, SEC and Justice Department may be a tad bit less forgiving to the brother from Brooklyn. Mayhap, I should step up my charitable, political, lobbying giving efforts...
Hello Reggie,
In your opening sentence I noticed that you have introduced a new word to the English language. This is very clever because it has a dual purpose. Inciteful could mean that the article you were referring to made readers react and it also gave them a good bit of insight! A thought provoking pun?
One part Freudian slip, one part typo :-)
Hi Reggie How about a gig in London? You have plenty of fans in the UK!
Proof that we r Phukked
Reggie I cannot read the whole thing, I tried, I did, but angry vomit just kept coming.
The solution to your problem is (of course) to swallow hard and then Buy The Fucking Dip. And no cheating by edging towards the exits. You must commit to the insanity, then allow yourself to be carried away by the insanity.
If you don't look you can't see the monsters.
I'm embarassed to be a CPA and represented by such a cowardly organization like FASB. Everyone involved in voting to change the MTM rules should be kicked out of the organization permanently. Of course if they hadn't given in Barney Frank and crew would've obsoleted the private organization and created another government entity in its place, or gave the responsibility to the SEC for oversight, while congress would create the accounting rules.
SEC already has oversight of FASB, which explains a great deal. So yes, Congress has socialized commonly accepted accounting rules for proper asset valuation. And since IASB follows FASB almost always, the worldwide banking system has locked up true transparency for life with no possibility for parole ( until the Black Swan commutes the sentence ).
Thanks, Reggie, for keeping this issue alive. It is the heart of the entire Ponzi scheme for the financial world.
I have voted with my dollars and am no longer a member of the AICPA nor the several state chapters in which I was enrolled. I no longer desire to be associated with a profession that served to perpetuate the largest fraud ever upon the American people. I will keep my state licenses but I refuse to be part of the accounting establishment from this point forward. Thank God I work in a consulting role and no longer have to attest to the fair presentation of financial statements.
"Notice how absolutely NO ONE was complaining about M2M between 2003 and 2007 when asset prices were flying through the roof!"
Capitalism on the way up, Socialism on the way down. Once again the rules are changed to benefit Wall Street. NFL should start changing rules in the middle of the Super Bowl, that's something the sheeple might care about.
We DID have M2M then.
When bubble(s) popped and asset values started collapsing, THAT'S when M2M stopped.
That's why a home is still carried on a bank's books at $500,000 when the actual home might be vacant, vandalized, and suitable for buldozing.
Why mark the paper down? Fed will buy it sooner or later for $500,000.
Hell, mark it UP some, $600,000, $700,000, $1,000,000. Fed will pay $1,000,000, no problem, take 'em about 30 seconds to print it, maybe couple minutes for ink to dry.
Or the bank can have it credited to their reseve account and make 3% interest on it, plenty to pay property taxes, etc, and have money left over.
disappointing and discouraging. wish it were different but this is further evidence of the banking capture of the usa.
This piece is a perfect illustration of the bankruptcy of regulation.
Mark to market was fine on the way up but a problem on the way down. I would suggest MtoM was a problem all along. Just as every attempt to regulate banks has failed, whether it was the British switch to a gold bullion standard in the 1920's, the suspension of specie payments by banks on the gold standard in the 1800's or any other con.
The problem is this: Bankers are criminals. They love wealth to the point of self destruction and social destruction. They collect and abuse power without regard for anyone else.
The solution is quite clear: it is not more regulation (which they will write to their own benefit) but the elimination of regulation and the development of a popular consensus that bankers are a necessary evil. To never be trusted, ever. To be denied access as much as possible and relegated to the position of tradesman. To deny them access to the legislative process beyond their status as citizens and to deny them access to the creation or control of the money supply.
They are a special class of criminal- one with unlimited means, especially if they can create these means without assets or wealth. Until we understand this basic truth, we will be subject to their dominion over us, our children and our grandchildren.
"mark+to+market" leads to three questions: how much did "it" cost? how much can it be sold for? what is likely the productive value? still subjective. very great post though.
http://covert2.wordpress.com
It runs a lot deeper than banking.
I lie to you, you lie to me - together we both walk free!