Comments on: Too Big to Fail then Too Big to Survive http://stocksonwallstreet.net/featured/too-big-to-fail-then-too-big-to-survive.php Investment Advice, Stock Picks, and Market Updates Sat, 04 Feb 2012 21:39:00 +0000 hourly 1 http://wordpress.org/?v= By: Greg M http://stocksonwallstreet.net/featured/too-big-to-fail-then-too-big-to-survive.php/comment-page-1#comment-629 Greg M Mon, 16 Nov 2009 03:04:49 +0000 http://stocksonwallstreet.net/?p=4128#comment-629 thevoice@voicedup.com, Great point! Have you ever read "House of Cards" by William Cohen? Basically exotic securities were valued by the averages of counter-party estimates. This would then affect companies by mark to market. Basically company A has exotic assets, they then call Company B and Company C. Company B says its there worth .97 on the dollar company C says .80 on the dollar BAM its assets is now worth .885 on the dollar. A LOT OF ROOM FOR MANIPULATION.... which btw Goldman Sachs was accused of. Another important thing to remember is under the historical price rule... most companies value their assets at the price paid minus any depreciation.... Yet inventory is valued at the lower of either price paid or market value... Whose is to say what is inventory for one company and an asset of the other. Agreed Mark to market artificially depressed values... by taking into account unrealized losses... READ HOUSE OF CARDS... great book... youd love it... As for too big to fail james.... I dont think firms should be able to leverage themselves 75-1 I mean I would never do that in my trading account... But again I'm not an expert in business management. So maybe there is an important reason for that....idk. thevoice@voicedup.com, Great point!
Have you ever read “House of Cards” by William Cohen?
Basically exotic securities were valued by the averages of counter-party estimates. This would then affect companies by mark to market. Basically company A has exotic assets, they then call Company B and Company C. Company B says its there worth .97 on the dollar company C says .80 on the dollar BAM its assets is now worth .885 on the dollar.
A LOT OF ROOM FOR MANIPULATION…. which btw Goldman Sachs was accused of.
Another important thing to remember is under the historical price rule… most companies value their assets at the price paid minus any depreciation…. Yet inventory is valued at the lower of either price paid or market value…
Whose is to say what is inventory for one company and an asset of the other.

Agreed Mark to market artificially depressed values…
by taking into account unrealized losses…
READ HOUSE OF CARDS… great book… youd love it…

As for too big to fail james…. I dont think firms should be able to leverage themselves 75-1 I mean I would never do that in my trading account… But again I’m not an expert in business management. So maybe there is an important reason for that….idk.

]]> By: James http://stocksonwallstreet.net/featured/too-big-to-fail-then-too-big-to-survive.php/comment-page-1#comment-624 James Fri, 13 Nov 2009 04:54:42 +0000 http://stocksonwallstreet.net/?p=4128#comment-624 The whole valuation system was wrong and part of the problem that led to our collapse. The whole valuation system was wrong and part of the problem that led to our collapse.

]]> By: James http://stocksonwallstreet.net/featured/too-big-to-fail-then-too-big-to-survive.php/comment-page-1#comment-623 James Fri, 13 Nov 2009 04:53:59 +0000 http://stocksonwallstreet.net/?p=4128#comment-623 Good points we cannot continue to leverage the future for todays profits. Good points we cannot continue to leverage the future for todays profits.

]]> By: thevoice@voicedup.com http://stocksonwallstreet.net/featured/too-big-to-fail-then-too-big-to-survive.php/comment-page-1#comment-621 thevoice@voicedup.com Thu, 12 Nov 2009 22:30:25 +0000 http://stocksonwallstreet.net/?p=4128#comment-621 The history seems clear. Mark-to-market accounting existed in the Great Depression, and according to Milton Friedman, who wrote about it just 30 years after the fact, it was responsible for the failure of many banks. Franklin Roosevelt suspended it in 1938, and between then and 2007 there were no panics or depressions. But when FASB 157, a statement from the Federal Accounting Standards Board, went into effect in 2007, reintroducing mark-to-market accounting, look what happened. Two things are absolutely essential when fixing financial market problems: time and growth. Time to work things out and growth to make working those things out easier. Mark-to-market accounting takes both of these away. Because these accounting rules force banks to write off losses before they even happen, we lose time. This happens because markets are forward looking. For example, the price of many securitized mortgage pools is well below their value, based on cash flows. In other words, the market is pricing in more losses than have actually, or may ever, occur. The accounting rules force banks to take artificial hits to capital without reference to the actual performance of loans. The history seems clear. Mark-to-market accounting existed in the Great Depression, and according to Milton Friedman, who wrote about it just 30 years after the fact, it was responsible for the failure of many banks.
Franklin Roosevelt suspended it in 1938, and between then and 2007 there were no panics or depressions. But when FASB 157, a statement from the Federal Accounting Standards Board, went into effect in 2007, reintroducing mark-to-market accounting, look what happened.
Two things are absolutely essential when fixing financial market problems: time and growth. Time to work things out and growth to make working those things out easier. Mark-to-market accounting takes both of these away. Because these accounting rules force banks to write off losses before they even happen, we lose time. This happens because markets are forward looking. For example, the price of many securitized mortgage pools is well below their value, based on cash flows. In other words, the market is pricing in more losses than have actually, or may ever, occur. The accounting rules force banks to take artificial hits to capital without reference to the actual performance of loans.

]]> By: thevoice@voicedup.com http://stocksonwallstreet.net/featured/too-big-to-fail-then-too-big-to-survive.php/comment-page-1#comment-620 thevoice@voicedup.com Thu, 12 Nov 2009 22:27:06 +0000 http://stocksonwallstreet.net/?p=4128#comment-620 James, Lets not forget what caused the entire financial collapse, the FASB changing account rules that were in place since the great depression. If this continues to occur we are in for more of the same. Unfortunately FASB will most likely be making a few more changes over the next few months which could be implemented early 2011...if you get a chance read this: http://www.voicedup.com/index.php/thevoice-on-the-next-mark-to-market-debacle/ When the housing bubble burst, the market for all those mortgage-backed securities vanished, leaving bank balance sheets larded with assets that no one wanted. So at the end of each quarter, banks had to write down billions of dollars of “toxic assets”—even though their value might’ve been artificially, and only temporarily, depressed. But if banks never intended to sell an asset in the current market, they reasoned, why should they be forced to value it as if they did? James,

Lets not forget what caused the entire financial collapse, the FASB changing account rules that were in place since the great depression. If this continues to occur we are in for more of the same. Unfortunately FASB will most likely be making a few more changes over the next few months which could be implemented early 2011…if you get a chance read this:

http://www.voicedup.com/index.php/thevoice-on-the-next-mark-to-market-debacle/

When the housing bubble burst, the market for all those mortgage-backed securities vanished, leaving bank balance sheets larded with assets that no one wanted. So at the end of each quarter, banks had to write down billions of dollars of “toxic assets”—even though their value might’ve been artificially, and only temporarily, depressed. But if banks never intended to sell an asset in the current market, they reasoned, why should they be forced to value it as if they did?

]]> By: James http://stocksonwallstreet.net/featured/too-big-to-fail-then-too-big-to-survive.php/comment-page-1#comment-618 James Thu, 12 Nov 2009 16:00:37 +0000 http://stocksonwallstreet.net/?p=4128#comment-618 What are your thoughts on Banks being too big too fail? What are your thoughts on Banks being too big too fail?

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