"mark to market" and FDIC limits

[Celebration]

Apparently the "in crowd" is today making noises about changing the mark to market rules. TODAY. Another thing is that they are making noises about changing the FDIC limits to $250,000. TODAY.

These things improve a bad bill. It makes it slightly less difficult to accomplish the coup planned by the Goldman Sachs crowd.

This will pass by the end of the week.

http://www.freep.com/apps/pbcs.dll/article?AID=/20080930/BUSINESS07/80930061

It was the right wingers holding out for these things.

With this bill we saw the liberals and conservatives uniting against the middle. They need to start worrying about a SERIOUS populist movement.

[Extend a Hand]

1. the republicans wanted the "mark to market" rules changed

so that banks could leave over-valued assets on their books as long as they weren't in default even if the market value has dropped significantly. I really think that is a huge step backwards. Banks should continue to be required to accurately mark to market so that investors/lenders have a way to accurately assess risk.

[Celebration]

3. it is all about "buying time"

So is this whole bailout-all about buying time. So, it either works or it doesn't work. In the past, these tactics have worked, but the problems are much greater now. It is a crap shoot. But if we are going the "buying time" route, we need to tweak the mark to market rules--I say this even knowing it is all smoke and mirrors. As long as we have the Federal Reserve System, where the dollar is backed by the full faith and credit of yada, yada, it is all smoke and mirrors anyway.

Changing the mark to market rules is far more preferable than giving Hank Paulson seven hundred billion tax dollars to use in hedge fund fashion to save his buddies' butts.

The FDIC limit increase should help the regional banks somewhat.

I think I would still probably vote against the bill without further changes, but these two things are improvements.

[LatteLibertine]

7. Here's what I've heard that I like

First no bailout in its current form. There are other ways to fix this.

No money for Paulson or Wall Street.

5 percent tax on all stock market transactions.

Increase FDIC insurance to 250K.

Get rid of "mark to market".

Help homeowners with bad loans. Renegotiate said loans at a

fixed rate for 30years. Drop and fix interest to a

reasonable amount.

[many a good man]

8. Ain't no market in mark-to-market

Nobody's willing to touch this stuff so the market value is effectively nil. Getting it off the books will unglue the market, but what to do with the paper?

What happens when someone takes the time to track down all the loans that make up this paper and we find out there's something like $60 Trillion of imaginary money booked as assets in every fund in America???

[Celebration]

10. that is the deep dark secret

How many of the *same* loans are in many different assets? Probably a lot. No worries, we'll all probably own a lot of it soon.

[many a good man]

13. Waddaya mean, "no worries" ?!?!

What the hell, it's only money. Only it wasn't, really.

[anigbrowl]

15. The market value is nil now because it's unsaleable

But the treasury can afford to take the long view. I don't expect these assets to be perpetually unsaleable, or anything like it; in fact, I'm pretty confident we'll make the money back OK - but it'll take at least a decade.

[anigbrowl]

14. Absolutely. 'Mark to model' is what got us into this mess.

[A HERETIC I AM]

2. Seems to me it was Obama who suggested raising the FDIC limit

http://money.cnn.com/2008/09/30/news/economy/Obama_FDIC/index.htm

[Celebration]

4. Yup--Republicans and Democrats that voted against it

All want that. Again, I find this coalition very interesting, and entirely predictable at some point. The ideological differences are getting ready to undergo a shift, I predict.

The Republicans were more instrumental in getting these changes, because they voted against the bill in greater numbers than the Democrats. So they are the ones with the leverage at this point. But, ironically, the more left wing Democrats want the exact same things!! The "true" conservatives do not like concentration of power.

[Dover]

5. I'm confused. Don't CDARS already have that function and even insure up to $50 Million?

Apparently they are a new thing. So what am I missing here.

Welcome to CDARS

CDARS® is the Certificate of Deposit Account Registry Service®. And it's the most convenient way to enjoy full FDIC insurance on deposits of up to $50 million. With CDARS, you sign one agreement with a participating local bank or other financial institution of your choice, earn one interest rate, and receive one regular statement. It's that easy.


CDARS is the perfect solution for many depositors — from non-profits and public funds to businesses, advisors (including trustees, CPAs, financial planners and lawyers) and individuals, as well as socially-motivated investors.


You've worked hard for your money. Now let it work hard for you. See for yourself
http://www.cdars.com/index.php

---------

CDARS: Beat the $100,000 FDIC limit
By Laura Bruce • Bankrate.com

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=114x40915

[Celebration]

9. these aren't regular checking accounts, I don't think

A lot of the current dislocations have to do with small businesses making payroll at their local banks. The businesses are freaking out.

Another thing we need is banks to lend to each other overnight. They no longer trust each other. The whole danger in this bailout is the result may be way more concentration of power in the banking system. Ugh.

[bhikkhu]

6. Like: "I'm going to break your kneecaps, and here's a cookie, too."

An increase in the FDIC insured amount would be an easy sell anytime, and is irrelevant to the bill. I hope the stupidity or complicity in DC doesn't run that deep, but it probably does.

[TomClash]

11. Changing the "mark to market" from

current market value to what exactly? Mark to make believe? Isn't that just taking a pool of CDOs and pretending we know what they are worth?

[Jim__]

12. "Mark to market" and Enron

Over-the-counter (OTC) derivatives on the other hand are not traded on exchanges, so their market prices are not as readily available. During their early development, OTC derivatives such as interest rate swaps were not marked to market frequently. Deals were monitored on a quarterly or annual basis, when gains or losses would be acknowledged or payments exchanged.

As the practice of marking to market caught on in corporations and banks, some of them seem to have discovered that this was a tempting way to commit accounting fraud, especially when the market price could not be objectively determined (because there was no real day-to-day market available), so assets were being 'marked to model' using estimated valuations derived from financial modeling, and sometimes marked to spurious valuations. See Enron and the Enron scandal. more...

In 1999, Enron launched EnronOnline, an Internet-based trading operation, which was used by virtually every energy company in the U.S. President and chief operating officer Jeffrey Skilling began advocating a novel idea: the company didn't really need any "assets." By pushing the company's aggressive investment strategy, he helped make Enron the biggest wholesaler of gas and electricity, with $27 billion traded in a quarter. The firm's figures, however, had to be accepted at face value. Under Skilling, Enron adopted mark to market accounting, in which anticipated future profits from any deal were tabulated as if real today. Thus, Enron could record gains from what over time might turn out losses, as the company's fiscal health became secondary to manipulating its stock price on Wall Street during the Tech boom. ...more...

[westerebus]

16. You get a cookie.

This is exactly what they are suggesting the bail out will do. Put a price in place based on some future sale. If it's that good a deal, why aren't they doing it themselves? They don't want to take the hit that's why.