George Rebane
“… market-value accounting is out of touch with the banking business.” Writes John Woodlief, former audit partner of Chase Manhattan. He argues persuasively that “letting the accountants set the rules without regard to public policy ramifications” is “not appropriate for bank lending activities” because “lending activities are long-term with profit determined by interest rate gap and ultimate collectability. Conversely market valuation (mark-to-market) is short term and subject to wide and volatile fluctuations throughout the period to maturity.” The point is that “loans are different from … investment securities for which market-value data is reported.” Most loans don’t have a market price. The bottom line is that collectability, not current sale price, defines the worth of loans. Sounds about right to me since for the issuer/owner, a loan is a stream of future payments whose risk doesn’t have to hang only on present market conditions.
Former Finnish president Martti Ahtisaari got this year’s Nobel Peace Prize, and rightly so for his lifelong work in the vineyards of world conflicts trying to squeeze peace out of some pretty nasty grapes of wrath. He ran the UN mission to Iraq in the early 90s and saw how Saddam ran his murder machine. As a supporter of the US invasion, and in spite of the absence of a nuclear or biological WMD program he said, “Since I know that about a million people have been killed by the government of Iraq, I do not need much (of) those weapons of mass destruction” to justify regime change in that country. Before and since then, the US has been damned for not going in to intervene militarily in other notable slaughters in Africa and elsewhere. There apparently is no pleasing the consummate critics of America.
Columnist Peggy Noonan quotes Senator Tom Coburn, “The root of the problem is political greed in Congress. Members … from both parties wanted short-term political credit for promoting homeownership even though they were putting our economy at risk by encouraging people to buy homes they couldn’t afford. Then instead of conducting thorough oversight and correcting obvious problems with unstable entities like Fannie Mae and Freddie Mac, members of Congress chose to … distract themselves with unprecedented amounts of pork-barrel spending.” Then Yale professor Jonathan Macey, in a separate piece, argues that the government is contributing to the panic and proposes that “it’s time to let markets do their messy work.” In spite of that, we all are standing in the town square with hopeful upturned faces expecting government apparatchiks Hank and Ben to come out and tell us how they will herd the international collection of tomcats toward the final solution.
I’m old enough to remember when LSMFT (‘Lucky Strike Means Fine Tobacco’) was turned into Lord Save Me From Truman. Maybe the T should now stand for Treasury.
Interesting, during the debate Obama was all for the US intervening to prevent genocide, but not if the genocide was in Iraq, where it was clear that Saddam's Murder Machine was in full operation. He cannot have it both ways.
Posted by: Russ Steele | 11 October 2008 at 02:07 PM