Comments on: How Congress Betrayed Investors to Help Banks

By: Pat G.

Pat G. — Wed, 03 Jun 2009 23:29:54 +0000

Congress part of the PPT? Who would have thunk it??

By: Mannwich

Mannwich — Wed, 03 Jun 2009 21:29:48 +0000

So here’s my question: when will the banks lobby to have market to market reinstated? After all, they loved it when times were flush and the “market” told them they were making big profits and thus could then collect big bonuses. This nonsense is all a big game. They’ll be begging for this to be reinstated at some point down the road when it benefits them.

By: cognos

cognos — Wed, 03 Jun 2009 21:21:16 +0000

“Mark-to-market” for banks was soo silly.

Point 1) Consider that we did not have MTM from the mid-1930s to 2006.

Point 2) Consider a simple analogy: you own a home. You bought it in 2006. You put only 20% down. You are current on your payments. The same house next store sells for 50% of your original “market” price in a foreclosure. The bank (or “debt regulator”) comes along and takes your house away. You are M-T-M bankrupt! You scream: but I am current on the payments, and I live here, AND I have earnings. Too bad. MTM!

There is no “market” for illiquid assets in a crisis.

Point 3) The basic fractional reserve banking system (think “Its a Wonderful Life”) is meant to be >10x leveraged. Its meant to be managed by accural accounting. It still has problems every 10-20 years and the regulatory regime is constantly evolving. But the basic approach is fine. MTM for accural loans is not helpful. For intelligent discourse on the subject see comments from William “Bill” Isaac former head of the FDIC. He has been quietly talking about policy mistakes (FDIC, Treasury, Fed) for over 1 year.

By: jritzema

jritzema — Wed, 03 Jun 2009 18:03:35 +0000

Sometimes Congress is too busy to threaten FASB so the SEC threates to ignore FASB’s new rule and FASB rolls over.

By: jritzema

jritzema — Wed, 03 Jun 2009 17:59:00 +0000

FASB is funded by Congress ultimately. They have always bowed to political pressure. That is why it took YEARS to pass stock option expense standards. Here is how it works: FASB comes up with a accounting standard that would improve transparency, business no likey, business lobbies Congress, Congress threatens FASB, FASB rolls over, repeat.

By: Onlooker from Troy

Onlooker from Troy — Wed, 03 Jun 2009 16:08:00 +0000

Mannwich

I too am disgusted and surprised (foolishly, I suppose) that this home equity withdrawal game is continuing at this point. With home prices still falling it’s crazy to still be in that business, even in the relatively staid Midwest). I see a couple of mortgage companies with the same commercials for debt consolidation, etc. (American Equity, Homestead Financial). I wonder how they’re financing this stuff since the whole shadow banking system took a dive. I thought these operations had imploded over the last year. WTF???

By: Mannwich

Mannwich — Wed, 03 Jun 2009 15:56:41 +0000

@Curmudgeon: “My” government? It’s yours too.

I agree with you and part of me isn’t surprised but this just lays it out in stark terms just how much they want to get the prior game going again, however absurd it may be. I’m a little amazed at how open they are about wanting people to tap their homes for equity again though. It’s just sobering and highly disappointing to see the evidence of it every day.

By: Steve Merrell

Steve Merrell — Wed, 03 Jun 2009 15:48:54 +0000

I disagree with this assessment completely. FAS 157 was a well-meaning, but poorly written accounting standard that did not adequately anticipate the kind of market seizure we experienced in 2007-2008. FAS 157 enforced a “mark-to-market” accounting dogma when there was no clearly functioning market. The result was a self-reinforcing downward spiral in asset values – not because most of the assets were really worth so little, but because the forced deleveraging of hedge funds resulted in fire sale transactions that were, in turn, translated into bogus write downs to comply with FAS 157. Do you really think those bogus write downs give investors a better sense of what a company’s assets are worth?

Steve Merrell
http://www.SmartNestEgg.com

By: bill_from_chicago

bill_from_chicago — Wed, 03 Jun 2009 15:48:06 +0000

@Gene

“It wasn’t Congress that rolled over. They are the symptom. We rolled over. We the people continue to elect and support politicians over and over and over without even a whimper of protest.”

Reply:

The reason Americans “roll over” is that don’t really realize what is going on. We have been totally brainwashed by the same corporations who lobby the politicians.

The average American gets his news from a channel like NBC. NBC is owned by GE, and GE wants to win huge government contracts and therefore NBC will never ever criticize the Government. In fact it is a key player in the cover-up, as they stand to make billions.

The lack of independent journalism means Joe Schmoe is completely in the dark. They hear “green shoots” and they are off to the mall thinking everything is fine.

Anyone who says America is the “country of the freedom” is delusional – its corporations that tell us what we should think, what pills we should take, who to vote for, what food is good for us, etc.

By: km4

km4 — Wed, 03 Jun 2009 15:47:18 +0000

Reagan started the US financial ponzi scheme in earnest ( about 30 yrs ago ) and Obama ( who admires Ronnie ) is just perpetuating more of the same for the Triumph of the Banking Oligarchs.

Obama really cares about just two things
1) pumping up great chunks of the Big Shitpile that’s essentially worthless unless the peak real estate values of the bubble can be miraculously restored with his Wall St bought and paid for economic team so he can
2) get the US economy back to ‘normal” ( IMO no way those days are over ) and restore the American dream ( a mirage ) so he can get re-elected