It turns out that while I am quite idiot resistant, I have failed at being idiot proof.
Bernanke Says Mark-to-Market Accounting Rule Should Be Improved
Here's a choice quote from Mr. Bernanke earlier today, Feb 25, 2009:
“Accounting authorities have a great deal of work to do to try to figure out how to deal with some of these assets, which are not traded in liquid markets.”Actually, they don't have a great deal of work to do. Instead, they simply have to recognize that if you can't sell something, it isn't an asset. That's pretty simple. Oh, and the collarary is that value of something is a function of what a seller and buyer can agree on. This talk of "no market" is a crock. Here's an actual honest translation:
Banks are capitalized with lots of crap that nobody is willing to buy at anything near the price necessary for the banks to not be insolvent by so many hundreds of billions of dollars that your hand cramps writing the zeros. Instead of letting these bankrupt companies fail and wiping out their bondholders, we absolutely must let them claim that a pile of crap that they can't sell to anybody for more than $400 is actually worth $30,000,000 or so -- just as soon as this "illiquid" phase passes and idiots with more money than brains (I'm looking at you Sovereign Wealth Funds) are willing to pay those kinds of prices again.The solution to this problem is actually pretty simple -- enforce the damn law! Banks have capital requirements -- when they fail to meet these requirements the FDIC comes in, makes the depositors good (up to $250,000 per account), and then does one of two things: if there is anything left over splits it up with the bondholders and preferred shareholders, or sells the remainder of the "assets" to another bank (hopefully one that isn't completely broke).
Instead, the Federal Reserve and Treasury are using us retarded, moronic taxpayers as ablative shielding to protect the personal income of the bankers and the investments of the bondholders.
I'm reminded of the scene from Liar Liar, where Jim Carey provides some of the best legal advice ever offered: "Stop breaking the damn law!"