Posted on 03/10/2009 10:07:08 AM PDT by jessduntno
Edited on 03/10/2009 10:18:58 AM PDT by Admin Moderator. [history]
WASHINGTON (MarketWatch) - Federal Reserve Chairman Ben Bernanke on Tuesday argued that regulators should make some improvements to controversial mark-to-market accounting rules at the same time as lawmakers create a systemic risk regulator that will fill in 'shocking gaps' in regulatory oversight.
(Excerpt) Read more at marketwatch.com ...
"I do think that this crisis has revealed some shocking gaps in our regulatory oversight," Bernanke said. "Who was overseeing AIG? Who was overseeing mortgages?"
Hmmmmm....what will THAT answer be???
“He has the support of House Financial Services Committee chairman Barney Frank, D-Mass., who said he plans soon to introduce legislation to create a systemic risk regulator.”
Mr. Fox, would you please watch the henhouse?
“... monitor how much exposure individual corporations and funds have to a particular investment product, such as sub-prime mortgage securities...”
A more appropriate question is “Why do sub-prime mortgages even exist as an “investment product”?”
Agree. Mark to market and other ridiculous rules that came out of the Enron failure only serve to artificially inflate/deflate earnings. They also have put housing prices into a flat spin/self fulfilling prophecy.
Mark to market forces companies to make short term adjustments to earnings based on short term swings on assets planning to be held long term. Best example I can come up with is imagine if you had to adjust your earnings for income tax purposes based on changes in the value of your 401k...
They won’t repeal it because the bad actors on Wall Street have already proven they can not be trusted to value assets properly which is why it is in place in the first place. What they are talking about doing is changing it IE tweaking it. I would not want to see this eliminated. You can’t trust the street to do the right thing...this crisis has proven this for all time.
What a great question!
The govt created the market(Fannie & Freddie buying the loans). The govt insisted that banks that were looking to grow participate in the program (CRA compliance is one of the factors regulators review if a bank wants to expand). The govt threatened anybody who raised concerns about these loans they would be cast as a racist (Frank & Dodd talking to Pubs). The POTUS successfully sued a bank in Chicago over this lending issue (representing Acorn).
I was a shareholder in Fannie Mae. Rode it into the ground actually.
Franklin Raines annual letters to shareholders were invariably openly racist. That is, if you believe that government coerced provision of INEQUALITY of opportunity based on “minority” status, AKA skin color, is indeed racist.
Sorry to hear that. At one time it was about as solid an investment that could be made.
Franklin Raines annual letters to shareholders were invariably openly racist. That is, if you believe that government coerced provision of INEQUALITY of opportunity based on “minority” status, AKA skin color, is indeed racist.
See where all this crap about everyone should own a home has gotten us! Everyone should have an opportunity to own a home, but it should be up to them to do what needs to be done to buy one and qualify for a mortgage. Not changing well established lending practices to fit those who refuse to make the life changing sacrifices needed to buy and own a home.
My mortgage is current with my lender, even though I have one of those dreaded “Alt-A” loans. I've had this loan for some years, and never missed a payment. Nonetheless, because there is little or no market for “Alt-A” loans right now, it's likely that my mortgage must be marked down dramatically, and may actually be currently carried on my lender's books at $0, in that it may be impossible right now to sell my loan.
But my loan is performing, and is likely to perform for some time to come, likely, even, to be paid off in full.
Even if I were to default on my mortgage, the value of my home is still a couple of hundred thousand dollars more than my mortgage, and that's AFTER a decline in value of a couple of hundred thousand dollars.
A more realistic way to value this mortgage would be to base its value off the cash flow that derives from the mortgage.
This isn't the same thing as carrying it at face value, nor is it mark-to-market. It is a reasonable third way to value a financial asset that isn't currently on the block for sale.
“Everyone should have an opportunity to own a home, but it should be up to them to do what needs to be done to buy one and qualify for a mortgage. Not changing well established lending practices to fit those who refuse to make the life changing sacrifices needed to buy and own a home.”
#####
Head of the Nail!
No money down, no documentation loans ended all that sacrifice so when times get tough these folks just walk away.
Yes.
For all the ongoing sacrifices and angst involved in securing and paying for one’s mortgage, there is, justifiably, a tremendous amount of outrage over this gross injustice. Couple this with the decimation of people’s long-accumulated nest eggs and you have a tsunami of built-up anger in this country.
A flashpoint of some sort, or perhaps a leader is needed to focus this outrage at the Marxists and racists who have taken over our country. In that the professional collectivists on the Left are devoid of palpable real world experience, I don’t believe they have any idea of the amount of potential energy that is building against them. Somehow this needs to be converted to Kinetic energy and directed at the proper targets.
“They won’t repeal it because the bad actors on Wall Street have already proven they can not be trusted to value assets properly which is why it is in place in the first place. What they are talking about doing is changing it IE tweaking it. I would not want to see this eliminated. You can’t trust the street to do the right thing...this crisis has proven this for all time.”
While I agree that the street is greedy - I do not think that they can not be trusted and that THIS crisis is the proof...there are any number of proofs...the lack of regulation and oversight was what got us here...the CRA started us down the slippery slope...the greed ran with it...voila, “You can’t trust the street to do the right thing” becomes the mantra...it seems to me it is a little like having a teenager and giving him the keys to your prize old muscle car for a ride to the store - you know it will eventually become chronic...people are people and the love of money is the root...isn’t that why the street exists, to find and exploit every loophole and legal avenue to make money? Do you take advantage of every tax shelter and loophole or do you happily send in overpayments to the IRS???
“A more realistic way to value this mortgage would be to base its value off the cash flow that derives from the mortgage.”
Agreed..but the logistics of individually examining every doc out there would be staggering...
I caught Steve Forbes on CNBC yesterday and he made a great comment. 43 congressional districts that voted for a Rat congressman a majority voted for McCain. His point was this can be turned around in a big way as early as 2010.
I stopped giving money to the GOP, but I do give to a PAC started by Sen DeMint.
SenateConservatives.com
I refuse to surrender. When we overcome this tyranny of perpetual adolescents there will be a lot of fixing to do but we will fix this mess once and for all.
It's pretty easy to determine whether or not a loan is performing. It isn't too tough to then derive values based on present value (although someone has to decide on the parameters from which to derive value).
It certainly would take some work because of the volumes of loans to be valued and how they've been sliced and diced across various investment products, but we're talking about trillions of dollars of loans, and the ability to return as much as a trillion or so dollars of otherwise impaired value to the balance sheets of banks. It's worth some tens of millions of dollars to get the job done.
Nearly 90% of mortgages are current and performing. After establishing the values to plug into the formula, it'd take a few nanoseconds of processing time to re-value each loan in a given portfolio.
It'll take some effort to then follow the flow of those values through the various debt instruments into which they got cut up, but like I said, it would add a lot of money back to banks’ balance sheets, and it wouldn't be a shady, abusive way to do it.
sitetest
“It isn’t too tough to then derive values based on present value (although someone has to decide on the parameters from which to derive value).”
that’s the rub...who decides, what the current value is and how to “adjudicate” the values en mass...I think I understand your proposed process...I just can’t picture deployment...
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