Not buying Newt’s accounting. Gore knows no rules. Prepared for duty. A Boogeyman sighting. Plus more.
Re: Newt Gingrich’s Time for Real Accounting Change:
As much as I have always admired and respected Mr. Gingrich’s views on all things cultural and political, his public hostility toward “mark-to-market” accounting is as confounding as it is misguided. It is certainly the case that the solvency of our nation’s banking system has been deeply compromised, but the sad fact of the matter is that this has not been the result of FAS 157, as Mr. Gingrich would have us believe. It has occurred because of a systemic problem relating to the origination, structuring and pricing of securities, principally (but not exclusively) credit-linked securities that was intellectually flawed from inception. In order for Mr. Gingrich to assert that what we are now seeing is an irrational “breakdown” in credit markets, he must also assert that these securities were correctly priced to begin with. They weren’t.
As a professional participant in credit markets for over 20 years, I can most assuredly state that what we are now seeing with respect to the downward re-pricing of credit instruments, and its attendant negative impact on bank balance sheets, is a return of market sanity — not the other way around. Perhaps one of the most disturbing and dangerous assumptions being disseminated by opponents of “mark-to-market” accounting is that, given time, these massive pools of structured debt instruments will, somehow, return to their original “values” and that, voilà, the banking crisis will be solved. The plain fact of the matter is that it is highly unlikely due to the fact that the underlying cash flows of these securities has not only deteriorated dramatically over the past 12 months, they continue to deteriorate on a month-over-month basis. Those who are actively involved in the buying and selling of these instruments know this and are responding to these deteriorating fundamentals not with panic but rationality.
Just as with any investment, when the fundamentals change, so does the price. So, to suggest that we should just ignore the actual facts, ignore this very real and very measurable value impairment and continue to permit banks to just hold these investments at some fictitious price (or “mark”) will simply not lead to the outcome that Mr. Gingrich desires just because it will make bank balance sheets “look” better. In fact, it will lead to greater uncertainty and mistrust on the part of the marketplace.
No, Mr. Gingrich, in the case of asset carrying values, Pandora’s box has been opened and all of the assertions to the contrary about their “true” values (read: the values the banks, and presumably you would like them marked at) will not change that fact. In addition, contrary to the self-serving assertions of Messrs. Paulson, Bernanke, Kashkari, and Buffett, the American taxpayer will likely NOT receive any kind of return on their investment of these securities. We’ve gotten our first peak at that fact with the roughly $9 billion write-down the Federal Reserve has had to take with respect to the financial backstop provided to JP Morgan for its acquisition of Bear Stearns. Stand-by taxpayers…more write-downs will be forthcoming.
Unhappily, the dirty little secret that people will just have to
accept (and in time they will) is that these securities were
structurally flawed when they were first conjured together in the
basement of the Wall St. Sausage factory. They were then
shamefully mis-rated by the rating agencies. Finally, they were
served up to a marketplace whose desire for a few more basis
points of “return” clouded their better judgment. And the outcome
was made that much worse because all of it was bought with
obviously imprudent amounts of leverage. In this whole tawdry
mess, every principle of sound banking and finance was “thrown
out of the window.” By permitting our financial institutions to
“price” their assets as they would prefer will not change that
fact. Indeed, it would be like letting the fox guard the hen
— Thomas J. Donatelli
GORACLE VS. REALITY
Re: Paul Chesser’s Truth, Economics, and Politics:
If Al Gore is convinced that human-caused global warming is a
threat to the planet, why does he still consume more electricity
in one month than I do in a full year?
— David Shoup
Whatever in the world has happened to the principles of
Consider this: …the planet has increased in temperature by one degree in the past 100 years [or two degrees, or three degrees — whatever arbitrary number they’re using nowadays].
Have we not acquired more accurate temperature-measuring devices in 100 years? Is it not possible that our measurements are just more accurate now? By one or two degrees?
Are we not measuring and reporting temperatures around the world at many more locations than we did 100 years ago? Would that not tend to improve the accuracy of the “average” temperature? By one or two degrees?
Who measured temperatures 100 years ago? With what instruments? Who averaged the temperatures 100 years ago? From what scientific data? Where can we find that data?
Who measured it last year? With what instruments? Who averaged the temperatures last year? From what scientific data?
And whatever has happened to the margin of error? A margin of error of less than 1 percent? If the media took a poll of 897 not-so-randomly-selected persons on which candidate 302,561,550.5 Americans believe will be our next President, a margin of error of 1 percent would be considered a dream come true.
A man of faith in a godless age is hitting Americans where it hurts.
Mr. and Mrs. American Spectator Reader, let P.J. O’Rourke talk sense to your kids.
In Britain, defending your property can get you life.
The debacle of this president’s administration is both a cause and a symptom of the decline of American values. Unless Congress impeaches him, that decline will go on unchecked. An eminent jurist surveys the damage and assesses the chances for the recovery of our culture.
It won’t take long for conservatives to scratch this presidential wannabe off their 2008 scorecard.
The American Christmas, like the songs that celebrate it, makes room for everybody under the rainbow. Is that why so many people seem to be hostile to it?
Was the President done in by the economy, or by the politics of the economy?