Thursday, Apr 02, 2009
Mark it zero
TIME Magazine: Banks told they can ignore the market. The market rejoices.
Mark to market accounting rules have been just suspended in the US. HPC regulars who follow this sort of thing will know this is huge news. Basically banks can pretend their assets are worth whatever they like, rather than pricing them at the market price. It would be like you denying your house has fallen in price by 20%, and getting a loan on it based on its 2007 value. So say goodbye to writedowns, and also goodbye to transparency and accountability. This is a license to lie. Capitalism is dead.
Posted by little professor @ 11:50 PM (1139 views) Add Comment
16 Comments
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1. paul said...
Err, what?
This is like saying that when prison walls have been breached and axe murderers have butchered the populace, instead of strengthening the walls to protect against further breaches, lets just tear 'em down and let all the prisoners out.
After all, what the priosners want must take priority over what the people want.
Right?
2. tyrellcorporation said...
Er won't this just make investors even more cautious?
3. little professor said...
Tyrell - that's the premise of the article.
"Investors seem to be saying: Banks now have permission to lie to us more, so let's bid up their stock prices! Then again, if investors are that dumb, maybe it makes sense for accountants to pay less attention to market prices in valuing the assets on banks' books. This is, in fact, the very quandary of mark-to-market accounting. If banks and other companies are allowed to ignore changes in the market prices for the assets they hold, they are basically being given permission to lie. But the market is, over the short-to-medium term at least, a hyperactive ninny."
4. tyrellcorporation said...
Waht's your take on events today? Will these measures really get the markets going again or are we witnessing a significant bear trap?
5. mark wadsworth said...
As Cityunslicker said, they're going to scrap the mark-to-market rule and replace it with mark-to-make-believe.
I've been ranting about this for a year, it appears that They (whoever 'They' are) got the upper hand yet again. Drat!
6. drewster said...
The smoke detector in my house is making a beeping noise because the batteries are low. You could say that, marked-to-market, the batteries in my smoke alarm have fallen in value. However I'm going to pretend that the batteries are fine; in fact just to prove how confident I am, I'm going to remove the batteries entirely. As long as there isn't a fire, it'll be fine.....
7. crunchy said...
The rich, poor divide will go into overdrive. The rich will have acesss to all this new funny money and rule changing to cause inflation
throughout the markets.
The poor will get the backlash, Inflation and crime.
Look you ars*holes all you have to do is let houses come down to normal price levels and you forward thinking banksters would not have
had to lend more than what was in the bloody system. D'oh! That's what this bul£hit is all about. Woohoo the houses have sucked up all
our money.
Quantative easeing and all the rest of what is happening is a crime. It's a crime against every working person who has to earn real
capital, and Brown say's Im trying whatever it takes to support hard working families and there children.
The one eyed two faced weasel makes me sick. .
8. rotten tomato said...
This is really astounding news. Obviously the financial oligarchies must feel extremely confident that they have us all under their thumb. I notice also that this news comes just after the idiot politicians have just ratified the banksters' will to ignite hyperinflation at the G20 with their suicidal 5trillion stimulus package. To me the scene today is far worse than it was in 1930, however nowhere in sight do we have an Franklin Delano Roosevelt figure to stand up to the financial oligarchies. Also, nowhere in sight so far do we see a Ferdinand Pecora commission to bring the banksters to the bench, grill them and give them lengthy jail terms like they truly deserve.
Although all these stimuli are purportedly for restarting the world economy, mark my words: the banksters will refill their coffers, and keep the taps of credit to the real economy closed.
History repeats itself for those who are too dumb to learn from the past. We may be witnessing the beginning of another Lombard era Western catastrophe. I hope I am dead wrong on this one.
9. devo said...
Ticking Financial Nukes (OTC Derivatives)
http://market-ticker.org/archives/925-Ticking-Financial-Nukes-OTC-Derivatives.html
10. devo said...
This is going to get ugly - imminently.
BOOM!!!!
http://market-ticker.org/archives/926-BOOM!!!!-FannieFreddie-etc..html
Thursday, April 2. 2009
11. debtfree said...
devo, good link.
Analysis of Institutional Risk Analytics.
AIG was a Ponzi scheme plain and simple, yet the Obama Administration still thinks of AIG as a real company that simply took excessive risks. No, to us what the fraud Bernard Madoff is to individual investors, AIG is to the global financial community.
As with the phony reinsurance contracts that AIG and other insurers wrote for decades, when AIG wrote hundreds of billions of dollars in CDS contracts, neither AIG nor the counterparties believed that the CDS would ever be paid. Indeed, one source with personal knowledge of the matter suggests that there may be emails and actual side letters between AIG and its counterparties that could prove conclusively that AIG never intended to pay out on any of its CDS contracts.
12. sneaker said...
Will this encourage more or less recklessness?
13. doggett said...
One of the comments on the TIME article wrote;
"Capital requirements are there specifically to keep you liquid in times of distress. How can one argue that we should ignore the prevailing market prices for assets that are used as reserve capital? If you are saying the market price is wrong, you are saying the assets aren't liquid, i.e. they aren't going to help you in times of distress!
If you want to use it towards your capital requirement, mark it to market. If you don't want to mark to market, then it doesn't count towards reserve capital. Simple as that."
Seems reasonable to me, or am I being naive? Could someone more familiar with this stuff comment?
14. george monsoon said...
Oh dear oh dear oh dear....OH Very DEAR ME!!!
15. mdmick said...
It's like the line from that spaghetti western:
"One bubble goes in, another bubble comes out"
16. This comment has been removed as it was found to be in breach of our Blog Policies.