Sep 24 2008
Bailout shit…
Ron Paul continues to be the voice of reason in a sea of choppy bullshit in Washington. He wrote an open letter about the bailout plan that sums up my exact thoughts on this mess. I actually wrote my congressman for the first time in my life about this (the bailout), I didn’t even receive a form-letter automatic response. Here’s an excerpt:
The issue boils down to this: do we care about freedom? Do we care about responsibility and accountability? Do we care that our government and media have been bought and paid for? Do we care that average Americans are about to be looted in order to subsidize the fattest of cats on Wall Street and in government? Do we care?
Yes I do care, the question is do enough other people care enough to do something about it.
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I sent my Congressman a little note as well. Luckily, he was agin’ it from the very beginning. Still no response though.
So you have business knowledge–what do you think about the idea of suspending mark to market accounting rules?
I don’t know much about mark-to-market, other than it is easy to abuse the practice. I know that Enron used this substantially and was a big part of the fraud they committed (watch the documentary “Enron: The Smartest Guys in the Room”, it is a great documentary that’ll piss ya off). The financial/accounting treatment of it is over my head, but Wall St. blaming mark-to-market or using it as an excuse really smells like bullshit spin and blame-dodging. Those guys knew what they were doing.
I thought mark to market was instituted BECAUSE of Enron and those folks as part of SOX. My understanding was that they were overstating assets on their books–basically saying things were worth what they wanted them to be worth, not what the market said they were worth.
SOX and mark to market forces them to revalue assets, in this case subprime bonds, daily, and they were pegging them to an index.
I want to read more about this. I caught a little bit of discussion on Squawk Box this morning and they were divided on it as well.
Given the choice, I still like the idea of loosening up accounting rules over a tax payer funded bailout. At least then the sharks will have a chance to feed on each other.
Nope… mark-to-market has been around for a long time. Enron abused it because there was no market for gas and electric derivatives that could be used to set the market price (i.e., Enron was basically the market), so they were setting their own valuation. It turns out that “unrealized trading gains accounted for slightly more than half of the company’s $1.41 billion reported pretax profit for 2000″ as a result of mark-to-market practices… that quote is from this article, it’s a bit long but a good read:
http://www.aicpa.org/PUBS/jofa/apr2002/thomas.htm
thanks for the article…I will definitely read.
I still want to read more, but does SOX force mark-to-market? And does it force a daily valuation? Would it help if banks were able to opt out of mark-to-market and/or daily valuation?
Well what happens if the government does bail us out. We may be in for more pain and suffering that if we do nothing. I watch television and we can hear opinions from both sides of the conversation. However, as of today it looks as though the Republicans are not interested in the bail out.
This totally goes along what Naomi kline wrote about in the shock doctrine, basically anytime the govt is using a scare tactic you better watch out to see what legislation they sneak in. Now instead of noes its the terrorists it’s bailout this company or the economy will collapse.