Nemo said:
All assets are worth precisely what I say they are worth.

This sounds suspiciously like my patented valuation model, Mark to Cthulhu, wherein assets are valued according to my ever-changing whim. You'll be hearing from my lawyer! [/snark]

A serious, dumb question: if they can use "significant judgment" now, what could they use before? A Magic 8 Ball?! {{Shakes ball.}} 'Future cloudy. Stockpile canned food.'

So much for transparency. It's the triumph of new-age finance -- "visualize the value, and it will be so."

It's official now -- the stock market is for gamblers only, and connected ones at that. The assymetry of information between issuer and buyer is too great.

This is the change I can believe in?

Change; I do not think that word means what you think it means.

The proposal for estimating market values will take into consideration whether there is an active market (such as the number of recent transactions, whether price quotes are based on current information, whether price quotes vary substantially, etc.). If there is not an active market, then the quoted price is a distressed transaction unless certain other conditions exist.

Collar stays are henceforth worth the greater of either market or fantasy.

With sufficiently "flexible" accounting rules, no bank can ever be insolvent. Why the authorities did not "fix" this sooner is beyond me.

Preparing a financial statement and assessing capital adequacy seem to be separate matters. It's not clear to me why FASB rules for valuation of assets would be binding on regulators (and vice versa, obviously).

From WSJ:
"Mexico says it will increase tariffs on about 90 U.S. products in retaliation for decision to cancel program that allowed some Mexican trucks to transport goods within the U.S."

No link yet. This is change we could do without.

Just say it's worth a million and borrow against it.

This seems consistent with a collapsing ponzi-finance complex.

Anything to prolong the prior illusions of wealth that the economy was built on.

Try to visualize standing on a ledge on the side of a building that's, say, 10 feet above the ground and a few feet wide.

Every second that passes the ledge gets a foot higher and an inch narrower.

You're afraid to jump and fall 10 feet, so you wait and suddenly you're staring down 15 feet and you've now got less ledge to stand on.

That's how ponzi finance is:

The only way out is down.

The longer you wait the bigger the splat.
The only question is how far down.

"Looks like they threw Elmo under the bus at the close."

Huh? Do you mean that Elmo ran into Kermit?

How do we comment during the 15 day comment period? I can think of some comments I'd like to make.

Why would I want to buy financial shares now? They don't pay cash dividends, and they're now allowed even more freedom to mark-to-make-believe.

The entire country is now on Prozac. Unreal.

Elmo is alive and well at the close. I'm glad... GLAD!!! to see the markets don't like this news. That means there are at least a FEW sane people left.

Bob Dobbs +1

why do they need to do that?
Look, market was UP again at the close today.
Crisis over.

The liberal media watchdog Media Matters for America and some economists are behind the effort, launched Monday. They're asking CNBC to hire economic voices with a track record of being right about the current crisis and do more to hold business leaders accountable.

Let me guess: So long as they don't advocate fiscal responsibility or believe that massive government borrowing is just a much of a problem as massive consumer and financial sector borrowing.

Amirite?

"Huh? Do you mean that Elmo ran into Kermit?"

Since we closed only a hair below the open, I figured they stopped Elmo somehow. Kermit left for the bar at 2:00. Lazy darn frog...

Classic "sell the news" reaction. Rally is nowhere near over yet.

Disclaimer: My market calls are always wrong.

The example given is NPV of cash flows. That actually seems a reasonable valuation technique, but I'd feel a lot better about it if NPV of cash flow was THE specific mandate, not just an example. - bankerwannabe

The problem w/ NPV is that a lot of the troubled assets were 'innovative'... so they don't actually put a lot of early cash demand on the borrower [who by paying back eventually DOES provide the cash]... so there isn't that big of an early cash flow to indicate whether the NPV will work out or not. It is all back loaded.

Say for example teaser rate 'pick a pay' option mortgages in RE or highly 'reserved' CRE deals... a small early default problem will show up as a small blemish in over all NPV but indicate MUCH larger problems to come once the reserves are used up (CRE case) or the interest resets &/or recasts (option ARM or pick a pay RE mortgages).

None of those subtle shifts would show up in the NPV but they market gets it and won't touch that crap - not anymore.

I am all in favor of NPV for more typical traditional instruments but I don't know anything that would work to model the slice and dice exotic instruments Wall Street has out there now.

There is no better way to manipulate the value of an asset than an NPV of all future expected cashflows.

disgusting move...look out below for the S&P

Hey, the banks announced last week they're profitable, things are going great, so why do we need to suspend M2M?

Dash --

how does this create confidence in the markets?

By eliminating the possibility of any major bank being declared insolvent (or "not well-capitalized") and being forced into an equity raise or a receivership regime or whatever.

Good for the banks, bad for everybody else. The only question is why anybody is surprised by this.

The accumulated filth of all their sex and murder will foam up about their waists and all the whores and politicians will look up and shout “SAVE US!” …

…And I’ll look down and whisper “no.”

You said that before. Got any new material?

Thanks fiduciary doodie .

The market went down because of the new Cramer Paradigm. The market began it's decent today from the high when Cramer appeared on CNBC with Erin about 3PM today. It was like watching the ticker go down every time OB would speak.

I am glad the Obama seized hold of this like a certain Senator, Congressman, Pastor, grabbed hold of that young mans handle and pumped it!

I suggest that the next step in our financial experiment might be
to eliminate the requirement that insurance companies hold reserves
against losses. That should be good for the next rally.

Yalt --

Preparing a financial statement and assessing capital adequacy seem to be separate matters. It's not clear to me why FASB rules for valuation of assets would be binding on regulators (and vice versa, obviously).

I am sure the regulators can do whatever they like... But in general, I assume they rely on the asset values as determined by standard accounting rules. (Of course they could change their requirements, which is my understanding of what Buffett was suggesting.)

I admit that I am no expert on banking regulations.

Theres a streamroller coming for you baby! You can bitch about the music but this band was imported!

"Companies would be able to apply the revised rule to their first-quarter financial statements."

Yes indeed B of A and C (and all the rest) shall return
to profitability the Q1 2009. I wonder how much TARP funds did a roundtrip via bankster lobbyists to particular Congressman whom in turn put the squeeze on Herz? God Bless Amerika!

This isn't really a big change to accounting rules, it's a clarification of the process by which firms can evaulate and "bucket" securities. Firms that didn't want to recognize bad numbers still have Level 2 and Level 3 to play with. Not a big deal, upon first reading of the release.

Agreed that this is only a clarification of level 3 assets, but is interesting in how if forces announced losses to be carried on the books going forward. Does this mean that if previously written down assets turn around that no paper gain can happen beyond the loss averaged over the remainder of the initial term?

I do not get it.

How Level-3 will marked for its value?

"Mark to Market soon to be replaced by 'Executive Order'."
Bloomberg Kind of News

Where's the paragraph on 'mark to fantasy'?

The lenders don't want to mark to market, they intimate, because they would then be shown under the spotlight as being the insolvent kind of bankrupt. So, like the stockholder who refuses to sell his losing stock that has dropped 30%, but is still falling, because 'someday' the stop might recover and they'd get their investment back. And I suppose some investment advisors might actually recommend that (hold for the long term).

Geither, Baranke, Summers and Obama, that firm of investment advisors/attorneys for old money, are still looking for a way to get the benefits of hold-for-the-long-term for the banks, but get all those non-performing assets off the bank's books. Guess what? Vaporized wealth is just that: vaporized, never to return.

I guess this go on a long time, until the next stage of turndown makes even the bailouts impossible.

FASB is just codifying the conventional wisdom that "you haven't lost anything until you sell".

ac writes "I think both political parties subscribe to the same economic ideas"

Exactly my point.

Short of letting the banks fail and replacing the current crop on bank (mis)managers, it really doesn't matter what we do. Mark to market is already somewhat irrelevant given level 3. Losses will eventually be taken. Kicking the can down the road allows banksters and bank bondholders a greater opportunity to loot the public at large.

Consider. Assets values in Japan have fallen for 20 years. Land values have plummeted ~ 90%. And that was before billions of Chinese and Indians started competing for any and all jobs.

It is so infuriating what these financial whores are doing.

If the banks believe their mark-to-fantasy prices, then they have no reason to sell to the taxpayer.

Wasn't that the original idea behind this proposal? This goes back to the "no bailout bill" that was floating around during Paulson's initial whatever-I-say-goes bailout proposal. If it was really true, as Paulson and Bernanke said, that the future price of the assets would be greater than the current market price so that the taxpayer wouldn't lose if they paid above-market, then why bail out the banks at all?

Both the Progressive Caucus and several conservative reps were on board...it was hard to tell how much they really believed the story that it was naked shorts and mark-to-market that was the real threat to the financial system and how much they were/are just calling the Fed/Treasury bluff.

"Can I pay my taxes in distressed property ?"

Awesome! Buy securities on the market and sell them to the Gov at maturity prices. I am sure the banks will be doing this. Or some new ponzi hedge fund. Kind of like the emission credits for polluters.

As my dad used to say, don't "try". do it. So Obama is claiming he will "try" to stop the bonuses at AIG... the NYTimes says the admin is surprised by the popular anger.
This looks like amateur political theater...see, I "tried" but there was nothing I as the President of the United States could do...does Obama really think this act is going to convince anyone?
Guess not, per CNN, his poll numbers have started dropping.

There is a very good intellectual arguement against marking securities held-to-maturity at discounted cash flows. After all, who cares what the market will pay if you're not selling? That arguement works well enough until you consider perhaps the major impetus behind SFAS 157 was the BS assumptions that banks were putting in the probability factors in their spreadsheets.
It would have required a Congresscritter to say, "Well yes, but you're a liar."
SFAS also has some other baggage called "highest and best use" that could lead someone to think it needs rework.

Dennis Kneale was right after all. Here comes the write-ups...

"Divina Commedia "

Not all of it is funny - in fact, practically none of it.

This is hilarious, re SBA loan program today.

Besides the new secondary market purchases, Obama also announced plans for implementing the SBA-related provisions included in the economic stimulus bill. Beginning Monday, the SBA will guarantee up to 90 percent of each 7(a) loan made by private-sector lenders, an increase from the normal 75 percent to 85 percent guarantee. This higher guarantee will encourage lenders to make more SBA loans, because they will have more protection against possible loan losses, according to the Obama administration.

Wasn't the problem with securitization that the banks didn't have enough "skin in the game"?

consumption could never grow to infinity. Valuations need to match reality.

There is a catch-22 here. If the banks lie their way to 'health', there is no justification for any further bailout or assistance programs... now, is there?

Given that, would you be buying bank stocks?

This must be a case of believing one's own lies. I mean if you've been on Mars or under a rock for the last year and a half, you might not know that there are some accounting problems. Otherwise, I don't think it matters. Everybody knows there is a big problem. Is anyone who follows the mkt even in a small way gonna think that the problem has gone away??

On the other hand, it looks to me like some additional mark downs are coming. Not enough, but some. Have I read this wrong.

Also, if no one else has mentioned it Tanta's friend Gretchen was on NPR, and actually sounded quite good.

Blackhalo @ 2:40
While my dad bears at least some resemblance to yoda these days I used to hear that same phrase from him all the time when I was a kid. Probably had something to do with him being a child of the depression or maybe not. It sure allowed him to teach me a thing or two that saved my ass over the last few years.

ac- that is about the most retarded analysis I have ever read on this site. Nixon and Cheney are saying the same things Krugman is?!! Uh, in what parallel universe did that happen?!! Please provide links to back up your statement with some actual facts..

Haha... Krugman recently said "deficits don't matter" on the Charlie Rose show and one the guests chided him for espousing the "Cheney Doctrine".

Also it's recorded fact that Nixon said "We're all Keynesians now" back in 1971.

Again, I think that speaks volumes to our current economic problems.

My 'tea leaves' were right again. Market went down. It's an actual indicator with scheduled readings too, not something fictitious. It's beginning to bother me because the predictive capacity is unexplained

Mythical valuations don't solve the problem. Someone somewhere in the web of financial interconnectedness will be withdrawing or defaulting. If there was a perfect circle of credit, it would be really easy to let it fail.

This just puts a limiter on the biggest conduits. Buys some time. It's the Japan/Zombie problem. Except there is no parasitic way to earn back into solvency right now, it would kill the host. So it helps nothing.

But Geithner will try to block AIG bonuses...

- NY Times

"But increasing the pressure on A.I.G., New York State Attorney General Andrew M. Cuomo said on Monday that he would issue subpoenas to make the insurer release the names of the executives in its Financial Products subsidiary who are to receive the bonuses, their job descriptions and details about their performance. In a letter to Edward M. Liddy, the company’s current chief executive, Mr. Cuomo said that if he did not receive the information by 4 p.m. he would issue subpoenas demanding compliance. After that deadline passed, Mr. Cuomo said that he had not received information he was seeking and would issue subpoenas for the data."

THOUSANDS AT CINCINNATI ‘TEA PARTY’ PROTEST SAY ‘STIMULUS BILL TOO STEEP’
Breitbart.tv » Thousands at Cincinnati ‘Tea Party’ Protest Say ‘Stimulus Bill Too Steep’

I can't tell if it is sharp satire or real local newscast

The referees just showed they're as corrupted and unbiased as the MM and politicians. I'm getting everything I own out of the markets. No one to trust now at all. SELL!