Posted on 09/24/2008 7:43:10 PM PDT by dynachrome
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.
(Excerpt) Read more at 1.daveramsey.com ...
I think it would help. I’m not sure that would revert the immediate crisis, but it would certainly improve the books. But because it’s an accounting gimick, it might not improve confidence, depending on thow it’s done.
I think if the bank can justify a higher than market value then the bank should be able to use the higher value. For example a student loan or mortgage that has a federal guarantee, hasn’t really lost value regardless of what the market is paying for it. Provided that you can hold it to maturity.
Or a mortgage that is secured by real estate that still has a current appraised value greater than the loan. Regardless of what the market is paying for it, that mortgage hasn’t really lost much value.
Brian Wesbury is an out-of-the-box thinker (and a genius).
Yes, a lot of people have suggested suspending the mark-to-market rule. It would likely have to be suspended at least a year, at which point we’ll have a very good read on the ultimate outcomes of the housing recession.
I am no accountant, but I listen to, and respect Dave Ramsey, so I give this a it sounds like it is worth a try BUMP :)
Tatt
I am no accountant, but I listen to, and respect Dave Ramsey, so I give this a it sounds like it is worth a try BUMP :)
Tatt
I’m no expert, but the more I read the more the market to market rule seems to be what is forcing those holding the junk mortgages to admit to paper bankruptcy faster then than they can work the problem to resolve it in an orderly, non-panic manner. Newt was the first I saw to suggest Paulson suspend this rule and cited that if SecTreas or SEC Chair could suspend short selling that they should be able to suspend this for 6 months and then transition to a 3 year rolling average price valuation, which Newt suggested as a better pricing mechanism. The current rule seems to require these assets be carried at current market value, but because nobody currently knows how much and especially which of the subprimes are really worthless no one is currently willing to buy them and thus without a market they’d currently count as zero. Suspend the rule to give the market time to separate the wheat from the chaff and the good firms won’t crash next week. Also they need to get the economy kick started so more marginal mortgage payers can afford their payments and avoid default. Newt suggested zeroing capital gain taxes, repealing Sarbanes-Oxsley and a drill everything energy policy, all of which would certainly help.
Grrrrr. What is causing these double posts?!
Tatt
Exactly what "market" is "frozen"? I can borrow money from multiple sources right now for just about any reason; home mortgage, home equity loan, car loan, business loan, signature loan. In fact, I'm getting inundated with offers from financial institutions to loan me money. Large financiers, like Buffet, are obviously still doing large financing. Exactly who are these credit worthy people/businesses who cannot borrow money and must have the government tear it from the taxpayers so they can give to them? Is it only insolvent banks? If so, it would be better to dissolve them through bankruptcy rather than trying to support their failure. Success should be supported and rewarded, not failure. There are plenty successful financial institutions the government could assist in taking up any slack.
Exactly what “market” is “frozen”? I can borrow money from multiple sources right now for just about any reason
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x act LEE!
I’ve seen that too.
McCain can win the election this week if he shows he was the only one with the balls big enough to say HELL NO - to the BULLSHEET BAILOUT RAPE. McCain saves US 770 billion, the market rebounds and he is proven Right.
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