petyaczar

Mark to Make-Believe

Mark2MArket is nonsense, it should be called mark to model = mark to last distressed sale model.

M2M requires a willing owner (unwilling seller) with performing assets mark them down to a discounted value so lo that a disinterested potential buyer (unwilling buyer) would consider buying the asset.

what nonsense this mark to market is it helped create the great depression of th 1930's and that is why they got rid of m2m in the late 30's.,

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doubleguns

You are of course right, I refered to this in my comment

"Its a big G/D "Do-loop" in computer speak. a self reinforcing death spiral."

In the computers when you have a Do-Loop = a badly written bit of code that creates a constant useless circular logic of calculation, you DO NOT redesign the computer hardware around the DO Loop you REWRITE the code so it functions properly within the system

You do not want an accuonting system that makes things look better than they are in good times, and worse than they are in bad times. In electronics, such circuits are known as positive amplifiers, they amplify in the same direction as the original incoming signal. You want something that will smooth out the discontinuities providing essential ballast to the balance sheet

IMO some of these folks are making the classic mistake of thinking the accounting system IS REALITY, No, the accounting system is supposed to characterize and represent a working version of reality. just as statistics are meant to represent a distribution of outcomes in a manageable and workable and understandable fashion. Statistics are never meant to represent any individual outcome at any individual point in time.

This will be a disaster for our economy and Obama has no experience and has shown no real understanding of the root cause of the financial panic and resulting credit crunch that has arisen out of the slime of this accounting problem. Kill mark to market, eliminate fair value accounting, go back to the accounting rules that haved served us so well since the first GReat Depression and see how quick;ly these financial problems dissipate.

In the "old days" companies got to decide when to write down or otherwise write off nonperforming assets. NOW regulators get to decide when to write off or otherwise write down performing assets. How the hll does a company manage that?

IMO

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John,

Your comment re mark to marke "being good" is a theoretical assertion.
Look around you at the realpolitik of what this D/A mark to market has created. The village is burning !! There is no stability in balance sheets from quarter to quarter, there is no trust in the financial system and so there is a credit contraction.

Its a big G/D "Do-loop" in computer speak. a self reinforcing death spiral.

Process wise it has gone like this

1)The Government encourages leverage and "creative financing"
2)The Government changes the accounting rules now requiring mark to market
3)Credit contracts - market prices drop as forced sales occur.
4)MtoM forces further erosion and raises required reserves.
5)Putting more money into reserves - has a deleterious effect on profit- eliminating it.
6)The "Balance sheet" poor institutions have to petition the very government that caused the problem to "bail them out"
7)The govt transfers green paper printed at taxpayers expense to shore up the eroded balance sheets the government mtom created.
8)The government takes over operational control of the companies it has "saved"

Seems to me this is the 21 st Centiury version of the old Vietnam expression "We had to burn the village in order to save it"

The above statement of process IS NOT hypothetical It is ALL DOCUMENTED FACT.

Your prescription of a "public CDS exchange" is in my view euivalent to putting a band aid on a carcinoma. - hides the root cuase, doesn't solve the problem -merely allows it to fester.

Kill MTOM, fair value accting, reinstate Glass Steagall, reinstate the uptick rule, go back to the accounting rules that have served us so well since the first Great Depression. and watch what happens as stability returns, markets recover, and credit is once again freed up.

Don't do it, and we will be facing the Greatest Global Depression in history AND in the words of Martha and the Vandellas there will be "No where to run to baby, no where to hide" This to be followed by socialism, elimination of the free market system, and the emergence of a truly Big Beother" government.

IMO

IMO

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The politicians caused this accounting meltdown, which caused the financial metldown, which caused the credit crunch, and will result in the Great Depression of the 21st Century.

The politicians caused this fiasco with their D/A Sarbanes Oaxley and the credit "reform" (sic) of 2004. with the institution of Mark to Market so called Fair Value accounting (sic).

So called fair value accounting destabilized the balance sheets of both borrowers and lenders. No one can trust anyoune's balance sheet anymore from one quarter to the next.

Go back to the accounting system that served us so well since the Great Depression, reinstate the Glass Steagall Act and the uptick rule on short sales. Drive a stke thru the heart of Mark to market accounting, cut off its head, and burn the corpus delicti and the financail markets will recover. IMO

Te politticians have pulled off a Coup DeTat overthrowing free market capitilism replacing themselves as rulers by fiat. And they managed to convince most of you torch bearing villagers to storm the wrong castle in an attempt to blame the financiers,bankers,tra... who are merely following the compulsory edicts of the G/D politicians.

You torch carrying villagers deserve the serfdom you will so surely achieve over the next few years. IMO

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What happener to Eli?
When will he be back?