wakeup call

Wasted Lessons from AIG

And Greenberg was misspelled

FASB Changes Perpetuate Fair Value Lying

Your generalization using the condo example is short sighted. The shifting sand issue should have been uncovered if proper due diligence was undertaken resulting in the deal never being done. This has nothing to do with mtm. Forcing companies with large, longterm hold portfolios to take paper losses due to mark to market accounting is dealing in the make believe. As an example if I make investments with a hold to maturity strategy and are forced to mtm quarterly the volitility reflected in my financial statements would have me go from red ink to black and back depending on general market conditions. Would I have earned or lost cash - absolutely not. Rather when I actually sell or redeem those investments then I would reflect a real gain or loss. Now tell me again why mtm is a good thing?

One Easy CDS Fix

While we are at it short selling should be eliminated. It creates a death spiral provided the short seller has sufficient resources to take a major short position. This at the very least is market manipulation. It was outlawed for a brief period last year for financial stocks. Once the successful test period ended it was not renewed. Taking out short selling and elimninating mark to market would go a long way towards fixing out busted economy and put some light at the end of the tunnel. Light at the end of the tunnel in my opinion is the only way to restore consumer optimism whihc will help prime the pump. The are two fixes that can be put in place with the stroke of a pen. Why is there no movement?

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

Eliminating mark to market accounting would have eliminated so much of the game playing and yet the government refuses to take this action. It would be a no cost fix for most likely $1.8 trillion of mark to market losses. There has been a great deal of talk about eliminating the practice but no action. Would be interesting to know why.

The Microwave Society's Answer to the Economy Is Half Baked

The problem with CDOs is not the underlying paper. The problem with CDOs is that the discount reflected a potential perception of possible market problems. If you look at the CDO valuations in relation to the actual portfolio performance you will see discounts that are no relection of actual performance. To remove this anomaly from the analysis take away mark to market accounting then deal with actual loans that do go bad. A bad loan is fixable since there is something tangible behind it. A CDO is a synthetic and difficult or impossible o fix.