Forbes: Market-to-market rules should stop

Contra Costa Times ^ | 030909 | Forbes

[KarlInOhio]

Right now anything other than mark-to-market is the bankers' equivalent of the no-documentation liar's loan that was so popular earlier this decade.... sure I make $200k per year as a ditch digger and no you can't see my paycheck or 1040.

[Mr. Jeeves]

"Market-to-market accounting is destroying capital of insurance companies and banks," Forbes said Monday in a Bloomberg Radio interview.

No, fraudulent use of leverage destroyed the capital of insurance companies and banks. The answer is to bring the bad debt out into the open and default it so we can begin the process of restoring trust in the financial markets, not to provide a mechanism for further obfuscation.

But the entities at risk bought and paid for quite a few politicians, and they are now demanding the agreed-upon service in return.

Steve Forbes does know better, he is just proving once and for all whose side he is on. And if you are an honest businessman, it isn't yours. This alliance with the tricksters who call themselves "capitalists" has killed the Republican Party - Democrats formed the same alliance but have done a much better job of avoiding association with them in the public mind.

[ChurtleDawg]

more than anything else, the mark to market accounting rule is stopping any attempt at economic recovery cold. I am convinced that it is the #1 cause of the mess we are in.

it needs to be reversed or suspended asap

[Fred]

I had to posted it as printed or else the viking kitty would have been showing up along with xcamel..I do not think they ever sleep

[Hoplite]

Saying it is either mark-to-market or misrepresentation is a false choice.

In a discussion of the present subject, I disagree.

The credit markets froze, if I understand it correctly, because nobody could figure out what the value of the other guy's assets were. Propagating that condition, as Mr. Forbes proposes to do, seems to me to be exactly the opposite of helpful.

Would you extend a loan to someone who's pledged $100 million in assets, when you don't know if those assets are actually GM shares valued using a one year rolling average?

Neither would anybody else.

[Ford4000]

Would you extend a loan to someone who's pledged $100 million in assets, when you don't know if those assets are actually GM shares valued using a one year rolling average?

One of the reasons the credit markets froze was the hoarding of cash to meet government reserve requirements. I'll bet the same mechanism is hurting GM, too.

[phothus]

Can’t believe all the people on here bashing an adjustment to Mark-to-market. Using cash flows or other methods isn’t mythology, and much more like reality than the current “market” for these assets. All of the bailout money is going to backfill the damage from the 2007 changes to mark-to-market accounting. There will be losses, but taking all the pain now - even for things that are cash flow positive is just stupid and is costing us all a huge amount of money.

[Hoplite]

One of the reasons the credit markets froze was the hoarding of cash to meet government reserve requirements. I'll bet the same mechanism is hurting GM, too.

Then are we not also talking about effectively suspending government reserve requirements by allowing accountants to overstate the assets of their business?

When GM sold off GMAC, they offloaded the vast majority of their toxic asset problem from their spreadsheet. They further wrote down $39 odd billion of unusable deferred tax credits in 2007, leaving them now with a simple "expenditures greater than income" problem, which we the taxpayers are kindly helping them through. (Ugh)