Ice

Why Mark to Market?

Let's give companies a choice - per assets class they choose M2M or Mark to Fantasy.

Just one rull;
market to fantasy assets need to be specified to line level on the balance sheet.

Management can in the side letter explain why those assets bear a high value than the current market price tells them. We investor can go through the line items and make our own assessment.

Accounting firm sign off on the accurateness of the descripition of the line items - not on the Mark to Fantasy value.

Problem solved for the investors and for credit market.

Problem remains for the regular to determine solvency levels of banks. I agree with that - but at least we solved the issue for the first two domains.

Let Lehman Fail

I'm sorry to say that I don't agree with some of the points you made;

- FNM and the likes are not bailed out. The equity holders are whipped out. (which is a good thing). Management should not have received bonuses and maybe even had to repaid prior years bonuses. What Paulson did by coming to rescue is to safe the world from the immediate effects of a FNM collapse and buying some time to solve the problem over a longer period. We the people of America would have paid the piper also in a complete bankruptcy. The good thing is now we get the bill presented over a decade.
- As for your statements on Bill Gross; he used FNM bonds as an investment vehicle. He saw the spreads between FNM bonds and other bonds open up over the last 18 months and thought it to be a good opportunity. He made a political assessment if it was possible for the US government to walk from the implicit guarantees on FNM debt. He was right the world did not allow the government to walk away for 40 years of statements which lead to widely accepted believe that FNM bonds where protected by the US taxpayer. If you want to attach blame start with Nixon and move up to all the other presidents who supported big business and started with the political bias that business is the solution for all US problems and challenges. FNM was a disaster, 40 years businesses have taken the profits and now when times become rough they ain't home.

Now we have proof we can't trust Wall Street with the welfare of the country, we need to distinguish between two aspects;

- reduce the short term fall out
- for the long term change of the regulations

The Crazy Lehman Share Price

Agree Felix; it is annoying to think that we always need an explanation.

The main reason why a stock goes down however we do know;

Because there are more sellers than there are buyers.

The rest is for historians not for a day by day Talking Head(s).

Doesn't the word Head have an other mean - think nautical.

Is the U.S. Banking System Safe?

may I add to the list of excellent economy writers the team from Pimco. Bill Gross and Co have been on the subject as long as John Mauldin!