Under New FASB Accounting Rule, Toxic Assets May Be Revalued By Banks

April 3, 2009 by · Leave a Comment
Filed under: Legal News 

Well this is were we have come.  Instead of letting the market determine the price of assets on their books, we instead changed the accounting rules so they can set the price for them and then ultimately sell them off and higher than actual value.   This move was a bad one and will backfire on the regulators face.   All this tells me, is the banks are in a much worsen condition and they had to play an accounting trick in order to no be insolvent.  This does not bring confidence back to the market or fool any of the smart money out there. Good job.

News (Washington Post):

The board that sets U.S. accounting rules voted yesterday to let financial firms report higher values for some troubled assets, a controversial step likely to increase some banks’ reported earnings but also heighten suspicions that the companies are concealing problems.

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Fed buys $2.5 billion of long-term U.S. government debt at auction

March 30, 2009 by · Leave a Comment
Filed under: Economic News 

Well between Obama giving the GM CEO the boot and the Federal Reserve having to purchasing more of our debt, the market is down sharply (over 4% at the time of this writing).  It is becoming clear that we had a “bear-market rally” last week and these rosy predictions were much too early and now the reality of what is happening is becoming clear.  

Who really thinks once the economy turns around, the Fed is actually going to retract all the credit they have let, not I?  We should know that if that happens, the economy will collapse again so that tells me we are going to see a heavy bout of inflation that has the possibility to destroy the currency.   I advise everyone to proceed with caution and trust your gut, it will mostly likely give you the most honest assessment of the situation.

News (Reuters):

U.S. government debt prices rose on Monday as heavy stock market losses and the threatened bankruptcy of two major U.S. automakers whetted investors’ appetite for safe-haven government debt.

Key Wall Street stock indexes were down more than 3 percent as the Obama administration forced out General Motors Corp’s CEO, pushed Chrysler LLC toward a merger and threatened bankruptcy for both.

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Toxic Asset Purchase Plan May Involve Purchases from Hedge, Mutual and Pension Funds

March 26, 2009 by · Leave a Comment
Filed under: Policy News 

 Now this is pretty big news that does not seem to be getting the same news cycles.  Up to this point it has been said that we are issuing all of this debt to “recapitalize” the banks to get credit (debt) flowing in the economy.  But now we have a new chapter in the bailout that does not involve banks at all.  It looks like the normal conservative buyers of fixed income assets have now gotten in trouble by investing in highly risky assets.  Are we now suppose to bailout these bad bets?

This is way beyond sub-prime assets being that those were only $500 billion-$1 trillion dollars total.  Basically we keep being lied to about what the real problem is and the extent this goes, I believe what has happen is all these companies were buying OTC derivatives, collected the premiums and now these bets are going bad and they are looking to the U.S. taxpayer to make them whole again.  This is not a form of capitalism I am familiar with.   I am not sure how we can have a system when the good times are good, everyone is happy and no questions are asked but when they go bad then we give bailouts.   It really kills the incentive to work really hard when you have to pay higher taxes for others mistakes and greed.

News (Bloomberg):

Treasury Secretary Timothy Geithner’s plan aimed at ridding banks of toxic real-estate assets may involve U.S.-backed purchases from hedge, pension and mutual funds at higher-than-current prices.

All financial market participants will be eligible to participate in the Treasury’s new program for older mortgage- securities, an administration official said. Investment funds will be able to buy and sell into the securities program, which was announced yesterday. The Treasury also unveiled a companion program to finance purchases of whole real-estate loans that will only allow banks as sellers.

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Nobel prize winner Paul Krugman slams Geithner bank bailout plan

March 23, 2009 by · Leave a Comment
Filed under: Opinion 

Dr. Krugman is correct, this does seem like the “trash for cash” plan from the former administration.  What is the point to bring in private capital to purchase these bad assets if they don’t even need to make good on the debt the government is financing if you can just walk away when it goes sour?

I would like to see a list of assets they are selling.  Unless they are mortgage-backed securities, I don’t see what else could have much value.   Maybe some derivatives that are still good but then you are getting the market is at bottom and more defaults are not on the way.  What I think might be really happening is that this could be away to get these assets / liabilities off the balance-sheet and when they go bad, the government will take them back and not the bank so in the end it will be our problem with a nice foreword that states we tried something that is a market-based solution.

Press Release (Reuters):

Nobel-prize winning economist Paul Krugman said in remarks published on Monday that the latest U.S. Treasury bailout program is nearly certain to fail, triggering a sense of personal despair.

U.S. Treasury Secretary Timothy Geithner on Monday unveiled a plan(Bloomberg Whitepaper on Plan) aimed at persuading private investors to help rid banks up to $1 trillion in toxic assets that that are seen as a roadblock to economic recovery.

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Video – Jim Rogers Says Geithner Caused Crisis and Must Let Banks Fail

February 16, 2009 by · Leave a Comment
Filed under: Videos 

Jim Rogers is spot on again about our current crisis and the fact that we need to let these banks and companies fail to restore confidence in the markets and let the bad debts get liquidated.  What we are doing now it hurting the savers in the country by pushing interest rates down and once we get a recovery, we will saddle the taxpayers with inflation after all this money printing.

Video:

 

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