Was too conservative accounting really the problem here?

zac is a tool

zac the sack..what do you know about law?

We are in this mess for the same reason that applies to the auto industry.
Give the public what it wants.

Human nature and greed - or vice versa.

Mostly, it is Congress and we vote the same irresponsible people right back in. The public has only one person to blame - themselves.

Regulation is only worth a damn if you have someone keeping an eye on the regulator.

Mark to Market rules were horribly schemed to deal with a market panic, and they caused a secondary wave of economic catastrophe.

FASB has done the right thing in attempting to correct the defect.

Mark to Market is still here, just a smarter version. A much smarter version.

An asset is worth what it is worth at this moment on this day. You can not price an asset on what it may be worth in the future.

I want to use these accounting rules on everything I own. I believe that my motorcycle which I have the title for will be worth $100,000 30 years from now. I think my car will become a rare collectors item and it will be worth $250k. Maybe my PS3 will be worth $5000 in 20 years.

Because I am sitting on half a million dollars of future value, by my estimates, I should be allowed to borrow that much right now and invest it. In fact using the leverage standards of the banks over the past few years I should be able to invest $10 million.

Where do I get my $10 million, I want it right now dammit. I am entitled to it by the rules of accounting.

That is exactly what the banks and hedge funds did and it is exactly what they are going to do again. What makes me fume is that this is exactly what I knew would happen. Average people lost trillions. The people who caused the mess made out like bandits and they get to start all over again.

If you talking about hold to maturity, that is not how it works.

Say a fixed mortgage has a principle and interest payment of 1,000 per month for 30 years. That means on the date of maturity they will get the last of 360,000 dollars. Hold to maturity does not mean they get to put the asset on the books at $360,000.

RE: Iridium's comment:

An asset is worth what it is worth at this moment on this day. You can not price an asset on what it may be worth in the future.

That is exactly what the banks and hedge funds did and it is exactly what they are going to do again. Average people lost trillions. The people who caused the mess made out like bandits and they get to start all over again.
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Well put . . . it is merely "reverting to the practices that caused the entire economic mess in the first place". Unbelieveable!!!

from Andre Haeff April 02, 2009

PROPOSAL :FIFTY (50) % Transition of Mark to Market Change from FASB retroactive for 1st Q 2009 4-02-09

Lets assume that today's (4-02-09) change in Mark to Market Accounting is a positive influence on the value of financial stocks:banks, private equity and others. A way to implement this smoothly would be to retroactively apply 50 % of the impact of the new rules to the 1st Quarter 2009. Thus, there is a partial (50 %)
postiive impact on their balance sheets in the 1st Q 2009 and the full force and effect of the modification would be felt (at 100%) in the 2nd Quarter 2009 and thereafter. This smoothes out the transition.

How to do this would be simply to A) account in the old way
(full mark to market) for the 1st Quarter 2009 and B) account in the new way (new FASB Mark to Market Rules) for the 1st Quarter of 2009 as well. Then add the results of every item A+B and divide by 2.

Example : for Corporation XYZ a typical item on a balance sheet would be liquid assets. Under A) liquid assets come out as
1 Billion USD ($) for Q1 2009. Under B) liquid assets come out as 5 Billion USD ($) for Q1 2009 .

Liquid Assets under this proposed 50 % rule for Quarter 1 2009
would be:

1 Billion USD ( Liquid Assets under A) + 5 Billions USD (Liquid Assets under B) divided by 2 = (-1Billion + 5 Billion)/2 = 6 Billion/2 =
3 Billion USD.

Under the 50 % rule the Company would report for Q1 2009 liquid assets of 3 Billion USD instead of liquid assets of only 1 Billion USD.

The following 2nd Quarter 2009 and thereafter the new rule would apply and the liquid assetts would continue to show more favorably.

Andre Haeff
La Habra Heights, Ca. 4/02/2009

is this not what led to the scandal at enron?

why are people so happy about this!?