Oregonrain

Mark to Market: Time of Death 8:45AM, April 2, 2009

I like Tyler's style as well.

First, the truth is that probably no more than say 20% of the American public know what a balance sheet is let alone know how it works. I think many of you would agree that I am being nice here. I know I was one of them (that had no idea) even though I had run a very successful private company.

Then one day "BIG Corp" came to town and said...hey let us pay you millions. Perfect! Now I am at Big Corp and the first company they give me to run the first day the controller comes in to tell me that "hey our balance sheet is really clean." I think to myself for one second..I wonder what she meant.

Next thing I know...I am running a major portion of BIG Corp...and same controller tells me to watch out .....major portions of the companies balance sheet/s have "problems." Again..at first...I wonder what that means.

OH..WOW. You mean you can cheat your P&L with that balance sheet thing! I felt like Gomer Pile and the Pentagon. My "moment of Zen" came to me when I had dinner with the Regional Controller who was leaving to take a new job (a short time after my promotion) and he told me he was leaving because "its just not fun anymore now that you are here...we can't be as creative." I wanted "creative people" I just wanted them in the design department not in accounting.

I mean when you are work in the real economy running real businesses when you don't have any cash you cannot make the payroll...and things stop real fast. The sad truth is that many many people have no idea what this change means. But, I concur it is a license to lie cheat and steel. And I also concur (and it is very sad) that that is nothing new. But the whole "system" became "infected" with this kind of thinking..and the higher up you went (on average) the worse it was and is.

Now the accountants...the outside ones were a total joke in that time...late 90's early 2000's. I mean a total joke. The operators who were cheating using their balance sheets were more afraid of the internal audit people than PW. Eventually it caught up to all of them. I think that the AA experience produced enough "shock and awe" that even some of the most "creative" accountants decided that people could actually go to jail for what they were doing and decided that being some Con's "bitch" was not really high on their list of things to do.

The answer is simple...hey we will just make the rules more "flexible." This is tragic and eventually there will be hell to pay...but..not today.

Go Tyler...

CDS Recoveries: Down and Out

Yeah...CDS....that is the ticket.

I mean really, if you are not on one side or the other of a debt trade on say Lehman these should be "taken out and shot." I can see no economic reason to have CDS short of a hedge if you are in a position. Then fine. But short of that it is just pure gambling. In 1929 they had this type of thing for equities and they called them "bucket shops."

In insurance you have to have an insurable interest. Which is to say you cannot buy insurance on a street person. The same concept should govern these.

Citi: Off the Banking Reservation

I think "users" comments are very good. Keep in mind that mortgages are virtually the only debt that cannot be reduced in a BK action at this point. Nice going ABA lobby.

The issue here is that most independent observers believe that the only way to really move on is to start the painful process of writing down toxic assets. Some of this has been done but not nearly enough.

If we are to avoid a "zombie real estate market" for the next 20 years or so this has to happen. This will allow people working with homeowners (so called loan mod companies) to have a "hammer" to wield when negotiating work outs. Other than that the banks will just tend to "kick the can down the road" by offering the same crap (that is the technical term) they did the first time round. (easy first year payments with a ballon).

The major issue is that it will very likely become necessary for the courts to appoint "special masters" or others to take on the case load. At this time there are just not enough BK judges to process the wave that will come.

But, with all that said...it is something that has to be done with the Feds back stopping the banks that have some legs after this is all over and letting the most irresponsible fail...and wipe out the equity and debt positions of the people who took on the private sector risks.

Want to Reform Wall St.? Bring Back Partnership Investment Banks

I agree with this article. Others have made the same comment.

But it appears that once the individuals balance sheet was no longer on the line this "freed them up" to become a good deal more "innovative" I think the term was.

Funny how people behave very differently when it is their own money on the line and not OPM. This is a concept that as a small buiness person I am very familiar with. No small business person would or was allowed to lever up their balance sheets 30 or 40 to 1. It is insane. Yet...this was the standard operating procedure it seems on Wall Street.

Another Big Bank Failure: More Likely Than Not to Occur

I understand that Buffett has three "buckets" when he looks at making an investment. Yes, No and too complex.

I have done reasonably well in both shorting and then going long with WFC now and again. I think that the government overlay here makes these investments "too complex" at least for me.

There are a lot of people that believe as this writer does that the banks are still hiding lots of I think "garbage" would be the polite term on their balance sheets. So the risk of another large failure cannot be written off. However, I think that letting Lehman fail and the aftermath of that convinced a lot of government and policy types that the alternative of letting a big financial institution fail is just too scary right now. Crap they rescued GMAC..when not many people were looking. I do not see them letting another large one go anytime soon.

2008 Bespoke Market Poll: Chance of Recession 50/50

I hope that the 50% who say there will not be a recession are right. I ma just curious to hear the case for that. We have close to a melt down in the financial markets (ok its gotten a bit better with a massive infusion of funds), the auto industry is on its butt...and housing...well we all know about that.

These three sectors are a huge part of the US economy. What sectors or sector is going to keep humming along so as to escape the recession.

I assume the only response is the consumer. But, at some point isn't the consumer consumed. Home equity maxed out, wages not going to well, unemployment going up...and credit cards maxed as well.

I would love to hear the counter side of this.