Feel Free to Make up Numbers

Bankers, including Citi’s (C) Vikram Pandit (center), huddled under a hastily-assembled TARP this weekend. Helicopters, from the Paulson Flight of the USS Taxpayer, will begin delivering relief supplies within the next few days.

Bye-bye 157. The Andy Fastow Rules are back

SEC.132. AUTHORITY TO SUSPEND MARK-TO-MARKET AC-

COUNTING.

     (a) AUTHORITY.—The Securities and Exchange Com-

mission shall have the authority under the securities laws

(as such term is defined in section 3(a)(47) of the Securi-

ties Exchange Act of 1934 (15 U.S.C. 78c(a)(47)) to sus-

pend, by rule, regulation, or order, the application of

Statement Number 157 of the Financial Accounting

Standards Board for any issuer (as such term is defined

in section 3(a)(8) of such Act) or with respect to any class

or category of transaction if the Commission determines

that is necessary or appropriate in the public interest and

is consistent with the protection of investors.

    (b) SAVINGS PROVISION.—Nothing in subsection (a)

shall be construed to restrict or limit any authority of the

Securities and Exchange Commission under securities

laws as in effect on the date of enactment of this Act.

Emergency Economic Stabilization Act of 2008
Page 88

Comments

[Steven Hansen:]

this is a mistake. why don't they suspend bankruptcy laws too. that way nobody will fail.

2008 Sep 29 06:04 AM

[Schweizer:]

This is a GOOD idea, and should have been done months ago.

Rally time.

2008 Sep 29 08:43 AM

[John Lounsbury:]

America sneezes and the world gets a cold. Let's hope that the cold does not turn into pneuminia.

2008 Sep 29 10:20 AM

[Xorthfred:]

I have lived this movie before in the great commercial real estate crash in the southwest (1988-1994) and elsewhere. If we had FASB 157, every bank in the country would have failed. Also, as i recall, writing mortgages to market when interest rates went to 19% in 1980-1982 would have also forced every thrift in the country to failure. Anyone with any real estate banking experience in appraisal or as a senior credit officer can tell you that the quarterly mark to market of long term assets (long term loans of any kind) will result in a rapid death spiral of asset values. After the spiral bottoms out in mass graves, the buyers pick up mortgages for pennies on the dollar, yielding as much as 95% per annum at "market value" because that is where they are traded. We sold office buildings in Dallas, Texas for $12 per square foot when rents were at $7 per square foot-which was where the forced sale "market value" whereby Canadians, Hong Kong investors and Brits bought our assets-(taxpayers FDIC taking the hit all along). Thank you so much (I am being sarcastic) Sarbanes Oxley, the "new RTC" (which was not a success but a govt. failure) and the heavy hand of regulation.

2008 Sep 29 12:21 PM

[henarl:]

The problem with "mark to market" is that it is not applied uniformly. The accounting firms collude with corporate execs to carry assets at above actual market values for a few years and then take a huge "mark to market" writedown in one year. This makes the company look very profitable at first, resulting in big performance bonuses for the execs and then correct it all at once. The execs don't get any bonus in that final year but they don't return their phony bonuses from the previous years. No matter what system we have, people will figure out how to work it.

2008 Sep 29 02:47 PM