Adrienne Gonzalez

Goldman Sachs, Morgan Stanley: Half Price on TARP Warrants?

"How about a license from the government to print money. "

bwhahahahahaha I love it. Can I give you 2 thumbs up? And let's throw in a big toe for good measure.


On Jul 22 01:49 PM Mad Hedge Fund Trader wrote:

> How about a license from the government to print money. It looks
> like Goldman Sacs is going to leg over the Treasury once again. It
> is buying back the warrants it issued the Feds as part of its TARP
> dole out for a mere $1.1 billion, giving a 23% annualized return
> on the investment. Why is the government selling? Do you think GS
> knows something about its future earnings the government doesn’t?
> Could this be the greatest example of insider trading of all time?
> Has anyone at the Treasury considered keeping free calls on GS to
> maturity, as Warren Buffet is with his paper? Then they might be
> worth $10 billion, or even $100 billion. I know that if hedge funds
> could get these warrants at the same terms as the Treasury, they’d
> be loading the boat. Safe to say that when GS shakes your hand, you
> want to count all of your fingers afterward.

Exclusive: Big Banks' Recent Profitability Due to AIG Scam?

Cuomo is on the case: ftalphaville.ft.com/bl.../

So sit on that for a minute...

FASB Unlikely to Suspend Mark to Market

This line says it all: "I agree that to mark the value of all the houses on a street to the price of the one foreclosed home is inappropriate. On the way up these same companies (and their stocks) benefited from increasing asset values but now that the financial industry is at the edge of the cliff, these same rules look too strict."

Mark to market was fabulous when these institutions were gobbling up exotic financial instruments like crack addicts and approving loans that should have never EVER under any circumstances been allowed just so they could bundle and sell off their risk. But now that the bottom has fallen out of their little scheme, MTM is the problem. Suuuuure.

While FASB has its own ineptitude problems to contend with, I'm glad to hear they didn't allow Kanjorski to threaten them. What can he do? Martial law of accounting? Give me a break.

Don't Blame Mark-to-Market for This Crisis

The CPAs don't really have a choice, BookValue. That's sort of how that works. They just go with what FASB dictates - the ineptitude of FASB is an entirely different subject and should be removed from this discussion entirely.

But it is certainly not for Congress to dictate accounting rules - when did these organizations get such power and who authorized this?

Don't Blame Mark-to-Market for This Crisis

BookValue,

Again, what about mark to market implies that these institutions load up their portfolios on this crap? Greed is not overseen by FASB, nor is it the accounting which dictated it was at all appropriate to blow the securities market through the ceiling.

henarl,

I'm sure ridding the accounting world of many current and possibly archaic rules would cure much financial malaise - but to the detriment of the industry as a whole. If we rewrite the rules simply because it is convenient, we are opening the sort of Pandora's box that the world is just not ready for. We do need to look forward - via well thought-out regulation and regulatory bodies who are not crippled by ineptitude a la the SEC. Not emergency plans hatched at the Federal Reserve. The over-reaching here is what bothers me, not the suggestion that the rules need an overhaul.

Don't Blame Mark-to-Market for This Crisis

BookValue,

I think you misunderstood. I'm not an FAS 157 purist. As much as FASB should take some blame for pulling moronic accounting rules out of their a$$ets, FASB did not tell these institutions to go out and load up on CDOs, CDSs, ad nauseum.

If MTM is rewritten or "modified" for the convenience of said institutions just because they are deemed important to the global economy (and I think the current economic spiral down the toilet proves what influence these institutions have on the larger picture), that essentially invalidates not only the responsibilities of FASB but the accounting industry as a whole. It says that these institutions and any others that may behave recklessly in the future can do whatever they want and the government will be happy to rewrite the playbook so they don't have to face the consequences of their actions.

Don't Blame Mark-to-Market for This Crisis

BookValue,

Don't get me wrong, FASB as well as the SEC are inept as well. The industry needs a makeover and badly.

But this is not the way to do it and is seriously overstepping Washington's power.

And if these financial institutions hadn't gobbled up securities like fiduciary crack addicts, maybe mark to market wouldn't be such a problem in the first place. It is that greed which destroyed the market and why should the accounting rule take the blame for that?

Don't Blame Mark-to-Market for This Crisis

Alright - to the critics, let's try a different path with this.

First of all, I don't write specifically for SA so if I curse like a sailor, that's my choice. I'm understandably upset as a member of the accounting industry to see ignorant, non-accountants treating rules as if they can be "adjusted" to make things more convenient for irresponsible parties. There is a reason for the rules in the first place.

Mark to market is NOT to blame for the crisis. And if mark to market needs to be reevaluated, then it is up to the regulatory bodies who spit out rules to accountants to decide that, not Capitol Hill, not the Fed, not the Treasury.

These CEOs would love nothing more than to make their bad decisions go away. Using MTM as a scapegoat accomplishes this, but at what cost?

It is encouraging their behavior. Sure, act as reckless as you want and we'll go ahead and make your bad decisions go away *poof* - what is to prevent them from behaving in such a way in the future?? Nothing if this boneheaded scheme works.

Should we also rewrite securities laws so Bernie Madoff doesn't have to spend 150 years in prison? It would be more convenient. But at what expense?