The American Spectator

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(Page 4 of 15)

Tim Gau br> Chester, New Jersey /p>

I've heard several people, and now Peter Ferrara, discuss the importance of mark-to-market in this crisis: "The first component of a new rescue plan is to suspend the recently adopted mark-to-market accounting rules..."

It is my understanding that Treasury Secretary (and former Goldman Sachs chairman) Henry Paulson adamantly opposes any changes to mark-to-market accounting.

Peter Ferrara continues: "The revenue loss would be far less than the $700 billion Paulson is asking us to hand him to bail out his friends on Wall Street."

Considering Paulson's insistence on mark-to-market, Ferrara must be mistaken in thinking that Paulson's benevolent intent is to "bail out his friends on Wall Street." Goldman Sachs is not selling into this crisis -- they're buying.

p>Assets that everyone expects to perform long-term are selling for cents on the dollar. Great fortunes will be amassed in this crisis. Am I crazy for suggesting that Henry Paulson is conspiring with his Goldman Sachs cronies for the purpose of looting their Wall Street enemies? br> -- Dan Martin br> Pittsburgh, Pennsylvania /p>

Mr. Ferrara's analysis of the financial breakdown doesn't pass a journalistic standard of truth. There were a host of deregulations enacted during the last eight years (and further still during the Clinton administration), most notably a deregulation of capital requirements on leveraging. Bear Stearns was leveraged 290 to 1, which would be like me (on my paltry $44,000 salary) taking out a one-year loan for $12 million. This is what Pelosi was referring to when she talked about "anything goes." It is irresponsible, yet allowed. No one expected (!) the price of homes to drop.

Ferrara sarcastically paints a picture of regulators looking over the shoulders of loan officers, saying "take this one, not that one." This is a misleading representation, and he knows it. Perhaps a reasonable legal limitation on leveraging? Perhaps limitations on CEO incentives to take absurd risks? (There are theories rife right now that this was most guilty of all, as there were no incentives for CEO's to play by the rules of reason.)

And further, it was not Freddie and Fannie's size that led to their demise. It was their practices. And they were practices that were allowed to occur throughout the entire financial system. Both parties are indeed to blame.

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