Free Republic

AIG's crucial role in the banking collapse Oct 09, 2008 Something very strange is happening in the financial markets. And I can show you what it is and what it means... If September didn't give you enough to worry about, consider what will happen to real estate prices as unemployment grows steadily over the next several months. As bad as things are now, they'll get much worse. They'll get worse for the obvious reason: because more people will default on their mortgages. But they'll also remain depressed for far longer than anyone expects, for a reason most people will never...

Accounting rules rarely garner much public attention, and for good reason: The business of toting up numbers is both devilishly complex and profoundly uninteresting to most Americans. This week, however, accounting was suddenly in the national spotlight as policymakers grappled with the ongoing financial crisis. At issue was a concept known as "mark-to-market." On Tuesday, the Securities and Exchange Commission (SEC), along with the Financial Accounting Standards Board (FASB)--the private regulatory body charged by the SEC with determining such arcane things--issued new guidance on how companies should apply mark-to-market rules to their balance sheets. It sounds like a small thing,...

A Modest Proposal – for a “NO cost� bailout: ASSUMPTIONS: This proposal is based on the assumption that the following accurately describe the problem we are trying to solve: That banks (some “commercial� banks, and most “investment� banks) are failing and/or will be unable to make loans due to large holdings of “toxic� debt instruments. That these “toxic� instruments are unsaleable because they include, in various proportions, Sub-prime mortgages., Because these instruments are not pure bundles of mortgages, but instead are Derivatives of such mortgage “bundles,� it is difficult, if not impossible, to accurately determine whether the underlying mortgages are...

Banking’s crisis of confidence deepens By Krishna Guha, Harvey Morris and James Politi in Washington and Paul J Davies in London Published: September 30 2008 20:10 | Last updated: October 1 2008 02:54 Wall Street rebounded on Tuesday in spite of a worsening crisis of confidence in the global banking system, as leaders of the US Congress moved to try to salvage the Bush administration’s $700bn (£385bn) bail-out plan. A proposal to increase the ceiling for government insurance on bank deposits to $250,000 emerged as the best hope of swaying reluctant Republicans and Democrats who voted against the bill on...

To a supporter of capitalism and free markets, the current debate over a Treasury Department proposal for a $700 billion fund to purchase illiquid assets, is troubling on many fronts. First, a temporary and targeted change in mark-tomarket accounting rules could help solve the current financial market problems at much lower cost. But this alternative has been dismissed with very little in the way of debate. Second, when the public hears that the government must save the economy from capitalism run amok, it loses faith in our free market system. In other words, the huge Treasury proposal has accelerated the...

Economist Wesbury is saying that if we change that one rule and don't force them to mark down to market value and just let them hold on to all the stuff, and say just on sub-primes for this period of time you can change that rule -- a temporary change -- that'll free the market up. It's seized right now; it's frozen. This will thaw it out and get it going again. He says that'll solve 60% of the problem ... and I think he's right.

How We Can Clean Up A Lot of the Economic Problems Remember Enron, WorldCom, Adelphia, and other companies had artificially put assets on the books? They'd say something was worth $10M when they bought it, but eventually it decreased in value, and they never updated the value in the books. That was part of the fraud. Under current laws at that time, they were all convicted and put in jail for fraud.Then we got all mad and made all these new laws that are coming out the wazoo called sarbanes oxley. It's a huge, massive law but the idea is...

The Republican Study Committee has released an alternative to the Treasury Department's bailout proposal and will discuss the proposal at a press conference today. Conservatives have expressed concern that the Treasury's proposal will alter the country's free-market system, awards massive authority to the Treasury, and fails to penalize debtholders and shareholders. The committee's free-market alternative is listed below: REFORMING A TAX CODE THAT DISCOURAGES CAPITAL FORMATION Two-Year Suspension of the Capital Gains: Immediately suspend the capital gains rate from 15% for individuals and 35% for corporations. By encouraging corporations to sell unwanted assets, this provision would unleash funds and materials...

Before tumbling into bankruptcy, Lehman Brothers Holdings Inc. proposed hiving off hard-hit commercial-mortgage assets so that the investment bank no longer would have to use battered market prices to value the holdings. American International Group Inc. contended in August that the use of market values was forcing it to recognize greater losses than it would ultimately realize on derivatives insuring complex financial instruments backed by mortgages. Now the demise of both firms is rekindling debate over whether so-called mark-to-market accounting has fanned the flames of the credit crisis. Regulators and Congress face growing pressure to decide if the market's turmoil...

Insight: True impact of mark-to-market on the credit crisis By Paul J Davies Published: February 28 2008 16:25 | Last updated: February 28 2008 16:25 Back in April 1993 the eyes of the world were on the beseiged Balkan town of Srebrenica, which the UN declared a safe haven for Bosnian muslims, and on Northern Ireland, where secret talks between leaders from rival factions kick-started a tentative peace process. In the same month, a less-noticed development saw US accountancy regulators approve a rule that paved the way for today’s widespread use of mark-to-market accounting standards. This rule, which forced US...