Topic: Libertarianism
Mark to Market, SEC? No, to Tinkerbell Justifying the bailout by shooting the messengerby Random Outlier
(libertarian)
Wednesday, October 1, 2008
Clap. If you really believe, clap.
The audience claps, and the dying Tinkerbell arises to fairy-flit another day.
It's all very positive and uplifting stuff, one of the reasons we love Sir James M. Barrie and musical comedies so much. They feel good.
I know you know Sir James has been dead a long time, but I'll bet you didn't understand that his ghost lives on and is working for the the government of the United States and its wards in financial industry.
Like Tinkerbell, the pols and their Wall Street buddies took poison. Like Tinkerbell they'd really rather not die.
And so Sir James, speaking most lately though the Securities and Exchange Commission of the United States of America says, "You've got to believe."
This means you.
Clap, you fools, for the latest scene in the long-running tragicomedy of an American economy listing badly, if not yet prostrate.
The problem as the SEC sees it is that the financial industry has for some years now been required to report the truth about the value of the assets it holds. It's called mark to market and means just what it says.
When you, Mr. CEO, file your financial statement you're required to state truthfully the actual market worth of that million shares of Enron you've been hiding behind the file cabinet. And of your warrants entitling you to purchase a hundred thousand shares of IndyMac at just six bucks per.
That way, investors thinking of buying shares of your company know what they're actually purchasing. Same thing for whoever is thinking of lending you some cash.
Since long before the current laugher on Wall Street our financial leaders have been crying about the unfairness of all that accounting fuddy-duddiness. Lately, facing the issue of their slap and tickle with strange derivative whores, their demands for relief from truth have become more strident, something like "MOMMMMEEEEE."
They wail for permission to report their stuff at the price they paid for it. Or what they think it should be worth. Or what it might be worth some day.
If in doubt, they ask Tinkerbelle.
She'll give them the good-fairy treatment of simple, child-like, faith and let them mark to model, or to maturity, or something -- most anything other than whatever a buyer is willing to pay you today.
It's no coincidence that some very sharp skeptics call that "mark to make-believe."
It's spelled out in some complicated detail in the FSAB (Financial Accounting Standards Board) rules, and some of it is the Sarbanes-Oxley law written after the Enron scandal.
The concept is simple. If you want to do business, you tell the truth.
Yesterday, our SEC decided that telling the truth to investors, lenders, and the American taxpayer was, well, just a little too subtle for our simple minds. Also gauche and picky, dontcha know?
Personally, almost everything I know about accounting is left over from high-school bookkeeping. But one Miss Bottomly dictum stands out in the memory: "Lie on a balance sheet: Go to jail."
Her archaic take on things was that accounting is just a specialized way of reporting actual facts.
---
With a large number of citizens looking on more carefully than usual, it's probably wrong to think the SEC has issued an order saying, "In view of recent disruptions in the orderly market, all requirements for honest financial reporting are hereby suspended in order that the financial climate be geared to permitting the good times to roll, redux."
But since I haven't found the text of the new rule yet, I can't be sure.
Maybe it isn't quite that bad , you say?
The Telegraph (UK) puts it this way: "The US regulator told banks that despite fair-value accounting regulations they did not have to use only fire-sale prices to value bad assets but could also use their judgement."
I see. We're to rely on the judgement of those top-flight folks at, say, IndyMac bank. That makes me feel a lot better.
It all tied in, of course, with the frantic "rescue" effort in the plush halls of our national Capitol, now in Day Three with the action moving to the Senate, depriving House Speaker Nancy Pelosi of high-value teevee time. (For some reason, I'm not as angry about that as she is.)
The latest news flashes report that the Senate will vote tonight on about the same bailout package the house rejected Monday, but with a few added sweeteners whose net result will be a further robbery of you, either directly in taxation of indirectly in currency debasement.
Stay tuned, and we are urged by our leaders to avoid all any hint of cynicism.
We are particularly exhorted to avoid humming another great old song, this one from the musical "Oliver."
You know, the one that goes:
"You've got to pick a pocket or two."
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The views expressed in this
article are those of Random Outlier only and do not represent
the views of Nolan Chart, LLC or its affiliates. Random Outlier is
solely responsible for the contents of this article and is not an
employee or otherwise affiliated with Nolan Chart, LLC in his/her role as a columnist.
Posted By: Jake, the champion of the constitution
Date: 2008-10-01 07:15:12
Did you forget to mention banning selling short 799 stocks? Some EU financials (Ireland, Fortis) are crashing hard too. Its interesting to see the parallels between 1929 British/American stock markets and currencies, although its a lot different
(fyi, second last line I think you meant to add "know")
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