Common sense commentary on the covid 19, politics and the economy.
Here is a quote from Steve Forbes who has been seen lately on most major news channels and in news print advocating for suspension of mark to market accounting:
“Bear Stearns and Lehman Brothers were cash-flow positive right up until their bankruptcy. Losses were paper losses, due to mark-to-market accounting. If we had had mark-to-market accounting in the 1980s, virtually every major financial institution would have gone under. We would have had a Great Depression in the 1990s.”
Now is their any reason that paper losses shouldn't count for this fine institutions? I don't think so! If we had gotten this over in the 1990's maybe it would have been a little less of a disaster before wall street "best and brightest" got their paws on the only thing they hadn't pillaged up to this point: real estate and the mortgage market. I see no logical nor economic reason for large firms to be exempt from mark to market accounting. They used the mark to market as a way to push off so called "paper losses" and hid the true extent of their leverage for years. We all should be so lucky as to use are projected earnings and projected asset values as fact on our balance sheet. I have said it before many times and I still believe that it is completely crazy to let these institutions mark to model. There is no way to accurately project future earnings based on past results. The great minds of wall street forgot to calculate for the real world scenerios that things might not work like the model and that overloading their balance sheets with can't lose mortgage back securities would mean that if there was tiny chink in their armor they would be hung to dry. The government is using tax dollars now to allow the likes of Citi, AIG, Bank of America to get away with mark to model accounting. We are paying for the banks refusal to mark their assets to the market according to the current laws. We are propping up banks that are breaking the laws with government letting them use our tax dollars in the process. We have spent many months waiting for the government to step in and start demanding transparency and true accounting numbers but they have chosen to take a different direction. The magical mystical "stress test" is just a pr stunt that should be labeled "we are trying to buy more time because these banks are toast model". The banks and now the government is prolonging the recession because the banks stared them down and the congress blinked. The banks covered their losses for so long that when they finally came whining for a bailout it caused complete panic in Washington. The banks have fleeced us all and the timing should not be forgotten and every single CEO that used Tarp funds should be fired. They knew they were going down in 2007 and early 2008 but they waited right until the election to grab congress by the short hairs knowing our representatives would not have the courage to resist their desperate pleas. The outcome would have likely been completely different had the same scenario took place in February of 2008 or even July 2008. The bankers have created this idea that they are all to big to fail and the government is buying it hook line and sinker.
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