Happy days

I'm just a stickler for keep playing by the rules that put you where you are. Don't change the rules when you screw up just to make the pain go away. I realize what you are explaining. But, by the stroke of the SEC's pin, Citi gained an additional $400+million in earnings this last quarter. Nice gift from the SEC I would say.

 

Yeah, I understand that but these are recent rules (2002-2003 or so) and had never been tested in a recession atmosphere. They simply are bad in a recession, good in a non-recession. I think our gov't needs to recognize that and be more flexible with them. Notice I said suspend and not do away with. They have value but not in an environment like this.

 

We have evidence on how this works in a recession. Japan.

 

Now, I am not a Japanese economic expert by any means but many articles I have read seem to indicate the Japanese did about everything wrong and we shouldn't follow their model at all.

 

I think the Japanese did away with mark to market during their "lost decade". Exacty like the US is doing now.

 

Didn't they also do a whole lot of stimulus packages to try to save the banks during that decade? Whereas the Swiss did the 'bad' bank and took the toxic stuff.

The thing about mark-to-market is that it should have been relaxed back at the beginning. It's nice they relax it now but it really is too late at this point. There is no doubt it artificially froze the books of the banks but relaxing it now makes banks that are in a mess look like they did a profit. Like I said, it wouldn't have fixed the problems. It might have helped us keep from having to pour trillions into banks to try to stabilize their books which were artificially de-stabilized to begin with.

 

Mark to market should of never been relaxed, Japan taught us that in the mid 90s. Most economist agree but as usual politics are involved and reason goes out the window. The effect of relaxing mark to market and going with fair market accounting is that it makes banks appear healthy when in fact they are not? Have you noticed the market since mark to market was relaxed? Except for that one day it's been mostly up. Nothings changed but the accounting. It's all fake.

 

On the other hand, it was the very accounting rules that artificially devalued the assets to begin with forcing mortgages that were, and are, still good mortgages to be written way down because there is no market for them even if the mortgagee is still paying on time. Again, Japan did the same exact thing we just did (from some reading I did on it today). Relaxed them in the middle of the crisis. We don't know from their example if we had gotten this deep if we had relaxed them at the beginning. We know they saw the very issues with it that we see now but it is too late now. Relaxing them in the middle of the crisis is merely kicking the can down the road a little bit and shows up as 'false' profits so to speak.

Eh, we still ain't nowhere close to getting out of this regardless. Look at the graph on page 1. Lots of resets still to come in the next couple of years.

 

The scary thing is many of the foreclosures now aren't from the subprime idiots. The new foreclosures are from those that no longer have jobs and thus can't pay normal mortgages. I've been in a real estate summary all week. Doom and gloom and I'm not even referring to residential real estate.

 

Given unemployment is a lagging indicator combined with the ton of resets, we still aren't close in my opinion. And I truly am an optomist. I'm still investing and haven't thrown a dime into gold. No fear for me but we do have to look at reality too.