If congress agrees to this we will have 1 MAJOR suckers rally and then a MAJOR crash

[dc dalton]

Well folks if you didn't think the stupidity and bending over backwards for these banks was over trust me when I say you ain't seen nothing yet.

This WAS (for clarity's sake) something Bernanke floated last fall (the exact same time they stopped short selling for 2 weeks), under pressure from his banking buddies, but they went a different direction and just threw money at them but it seems the idea 'has legs' again.

The idea? Well they want to stop forcing banks to use the 'mark to market' rule. What this rule forces banks to do is value their assets at the current market value (if they were to sell them today). For instance if they have a mortgage on the books at $200k and the current value of that home is really $100k they have to 'write down' the lost $100k. This is especially true when they have foreclosed on a home and now 'own' it in an area where home prices have plummeted (think south Florida).

Basically it forces banks to keep accurate books with REAL valuations of their assets.

Well it seems the banking lobbyists are whispered in the ear of congress AGAIN because this Thursday a House Financial Services sub-committee will debate whether to suspend this rule.

Now if they do decide to suspend it that will basically mean banks can inflate the value of their assets to some magic number, a number THEY say they can sell the asset in the future. They can literally, overnight inflate their books with theses numbers and make themselves look a whole lot better to investors. Wall street will have a MAJOR "sucker's rally" ..... but that rally will in fact be nothing more than the last dying breath of our economy.

What's the problem with that you say? Well this asset inflation is almost the same thing that happened while this 'bubble' was growing. Once again inflated bullshit numbers will be 'on the books' until they, once again, prove to stink worse than last month's gym socks ... and the crash will start over again and could very well be 10 times worse.

While we scream and yell about congress and gun rights not too many people pay attention to stuff like this BUT it can and probably will effect you in some way, shape or form down the road. This should be an issue every American understands and concerns themselves with because our economy can be taken down along with trillions of dollars of money that we, our children and our great grandchildren will have to pay back.

And lastly it could in fact be the final nail in the coffin that throws us into an all out depression, a depression that could last a decade.

Links:

http://www.complianceweek.com/blog/w...middle-ground/

http://www.reuters.com/article/manag...54048120090304

http://www.enquirerherald.com/369/story/570998.html

[Guns4Fun]

Are there really people that stupid to beleive this and ralley the market because of it? I mean seriously. Are people really this dumb to buy this idea?

[dc dalton]

Are there really people that stupid to beleive this and ralley the market because of it? I mean seriously. Are people really this dumb to buy this idea?

Brother I HATE to be argumentative with you because we are 'in the same mind' but YES they are that stupid!

The pundits on CNBC will 'call the bottom', Jim Cramer (the whore of Wall street) will proclaim "It's time to BUY BUY BUY" and yes the Sheeple will flock to the trough and start buying and they WILL lose there asses.

If I hadn't seen otherwise smart investors lose their asses over the past 9 months (my dad dropped $250,000 into the market in Sept after I TOLD him to stay the F out) I wouldn't believe it but yes people ARE that GD stupid!

They will believe anything some moron on TV tells them and when the market starts 'surging' the screams will be BUY BUY BUY.

All I can say is god help them .. I will stick with my gold, silver, guns and ammo because I KNOW they are the real winners!

[autotech6506]

I bet if someone printed an article that said that the CEO of GM farted the market would drop 200 points minimum. Anymore one day the market will hear something it like and it'll go up but the next day they will get some bad news and it will drop twice as far. So I believe that DC is 100% right.

[Dredly]

Actually the stocks spiked just on the RUMOR That this was going to be discussed, pretty sure this was mentioned on Friday... notice all the bank stocks had a bit of a spike at the same time? (you may have to zoom in to 5d to see it)

http://www.reuters.com/finance/stock...w?symbol=BAC.N



http://www.reuters.com/finance/stock...w?symbol=WFC.N



http://www.reuters.com/finance/stock...iew?symbol=C.N

[Guns4Fun]

I bet if someone printed an article that said that the CEO of GM farted the market would drop 200 points minimum. Anymore one day the market will hear something it like and it'll go up but the next day they will get some bad news and it will drop twice as far. So I believe that DC is 100% right.

I don't know. One of the reasons the market is in the shape it is in--is because of the unknown. If we allow them to continue to artificially inflate their assets we will again be in the same boat when banks continue to fail.

What we need is to let the people see for real just how toxic their assets are let the market slump and once the people see the bottom, they will consider getting back in the game. To me, it is the fear of the unknown that keeps everything so nervous.

If people are really this stupid, they deserve what they get.

[dc dalton]

I bet if someone printed an article that said that the CEO of GM farted the market would drop 200 points minimum. Anymore one day the market will hear something it like and it'll go up but the next day they will get some bad news and it will drop twice as far. So I believe that DC is 100% right.

You sir are 1000% right (and rep sent) ... the market right now is running on nothing but fear and conjecture .....

WHY? For the simple fact no one knows what to believe, who to trust and what the F is REALLY going on. Wall street investors (like most Americans) have become lazy. They listen to CNBC and make their investment decisions based on what they hear ... NEVER knowing that those CNBC 'talking heads' know nothing about the REAL economy and what is really happening (or maybe shills for the investments).

I swear to god it makes me want to scream how freaking stupid people have become. Now I'm no where near an expert but I can sure as hell realize that if a bank is allowed to 'fudge their numbers' nothing is right in the market.

This makes Greenspan and Clinton look like farts in the wind .. This WILL allow these greedy pieces of SHIT the ability to manipulate their books, sucker in investors, allow them to take their bloated bonuses and then when it all boils down to it leave US with the mess.

[eXceLon]

The idea? Well they want to stop forcing banks to use the 'mark to market' rule. What this rule forces banks to do is value their assets at the current market value (if they were to sell them today). For instance if they have a mortgage on the books at $200k and the current value of that home is really $100k they have to 'write down' the lost $100k. This is especially true when they have foreclosed on a home and now 'own' it in an area where home prices have plummeted (think south Florida).

Basically it forces banks to keep accurate books with REAL valuations of their assets.

Not exactly. The value of an individual home is irrelevant, so long as the borrower continues to make their payments.

The problem isn't individual mortgages, the problem is "mortgage backed securities". Banks that lend to individual home buyers rarely hold on to the debt these days, but package them up into complex securities and then sell them on the market to investors. An individual security might include hundreds of mortgages of varying quality. That security then might be packaged up into other, more complex investments, and sold again.

That's where the problem comes in. These products are so complicated, that nobody actually knows what they own. Since nobody knows whether these securities contain good or bad mortgages, nobody is willing to buy them anymore.

An individual security might contain good investments, but no one really knows and therefore no one is willing to buy them. That means that the current market value is effectively zero. By the "mark to market" rule, that means the owner of those securities has to record the decline in value of the security. Even if the underlying value of the mortgages in it is otherwise solid.

Despite how bad things are, the vast majority of mortgages in this country are current, and most people are making their payments. That means that most of those securities, which consist of those otherwise good mortgages, will ultimately make money. But since there is no demand for them on the open market, the banks holding them have to record a loss. Recording that loss threatens to destroy the companies holding the mortgage-backed securities.

Suspending mark-to-market is one possible means of preventing that. If banks aren't required to treat these securities as though they are worth nothing, they'll be able to just hold on to them and see how they actually turn out. Chances are they'll be worth much more than the current market value in the long run, as for the most part people will continue to make their payments on time.

Now, I don't necessarily know if this is the best solution. There are a lot of arguments for and against it. There might even be better ideas. I'm not a financial expert, and the financial experts can't seem to figure out what to do about this crisis, so it's beyond me to say what the best course of action would be. However the nature of the situation is a bit more complicated than you've described it. It's not about recognizing the actual value of houses, it's about the inability to place a value on complex securities.

The Wikipedia page on "Mark to Market Accounting" has a pretty good explanation, as well as a section describing the relevance to the current financial crisis.

[H.E. Pennypacker]

The problem with marking to market is there is no market for some of this stuff. How is one supposed to value something no one wants to buy?

On one hand, transparency is nice...but when a bank has to mark something down to what it thinks it's worth, and when banks are collapsing because of this, I think it's a problem. The markdowns are outrageous, IMO, and are the main drivers behind the whole financial sector of the stock market - and economy - going into shambles.

[dc dalton]

Not exactly. The value of an individual home is irrelevant, so long as the borrower continues to make their payments.

The problem isn't individual mortgages, the problem is "mortgage backed securities". Banks that lend to individual home buyers rarely hold on to the debt these days, but package them up into complex securities and then sell them on the market to investors. An individual security might include hundreds of mortgages of varying quality. That security then might be packaged up into other, more complex investments, and sold again.

That's where the problem comes in. These products are so complicated, that nobody actually knows what they own. Since nobody knows whether these securities contain good or bad mortgages, nobody is willing to buy them anymore.

An individual security might contain good investments, but no one really knows and therefore no one is willing to buy them. That means that the current market value is effectively zero. By the "mark to market" rule, that means the owner of those securities has to record the decline in value of the security. Even if the underlying value of the mortgages in it is otherwise solid.

Despite how bad things are, the vast majority of mortgages in this country are current, and most people are making their payments. That means that most of those securities, which consist of those otherwise good mortgages, will ultimately make money. But since there is no demand for them on the open market, the banks holding them have to record a loss. Recording that loss threatens to destroy the companies holding the mortgage-backed securities.

Suspending mark-to-market is one possible means of preventing that. If banks aren't required to treat these securities as though they are worth nothing, they'll be able to just hold on to them and see how they actually turn out. Chances are they'll be worth much more than the current market value in the long run, as for the most part people will continue to make their payments on time.

Now, I don't necessarily know if this is the best solution. There are a lot of arguments for and against it. There might even be better ideas. I'm not a financial expert, and the financial experts can't seem to figure out what to do about this crisis, so it's beyond me to say what the best course of action would be. However the nature of the situation is a bit more complicated than you've described it. It's not about recognizing the actual value of houses, it's about the inability to place a value on complex securities.

The Wikipedia page on "Mark to Market Accounting" has a pretty good explanation, as well as a section describing the relevance to the current financial crisis.

While I agree with you on SO many levels we also have to take into account markets that are worth 10% of what they were a year ago (Detroit comes to mind) .... IF (big if) they could separate the good from the bad (good luck since mortgage backed securities have become the norm) then MAYBE your ideas would work.

Problem is we cannot, and their in lies the problem.

The problem with marking to market is there is no market for some of this stuff. How is one supposed to value something no one wants to buy?

On one hand, transparency is nice...but when a bank has to mark something down to what it thinks it's worth, and when banks are collapsing because of this, I think it's a problem. The markdowns are outrageous, IMO, and are the main drivers behind the whole financial sector of the stock market - and economy - going into shambles.

yes, if you have something that NO ONE wants what is it worth?

Herein lies the problem. The banks own tons of good mortgages and tons of bad .. but how do we differentiate between the good and the bad if we don't know what they are 'holding' .. as the old saying goes "the devil is in the details" and THAT is what worries me ... will bank "A" pollute those details? Without "Mark to market" what will those bankers decide to do?