Categories
Fun

I like ONS, but I don’t like AIDs

Reading Time: 8 minutes

(Update Apr 2). April Fool’s day was yesterday but Financial Fool’s day continues. FASB just lifted the strict mark to marke rule (business week; market watch).

(Original) This is NOT what I am saying, but this is essentially the bankers and their friends in congress are saying these days. Tomorrow FASB will vote on fasb 157 E. Note the (in)famous House Financial Service Committee (headed by Mr. Barney Frank, the same committee grilled Mr. Liddy on AIG bonus) had a hearing on “Mark to Market” accounting rule a few weeks ago. In the hearing some lawmakers pushed for changes.

The fat cats in Wall Street has enjoyed the upside of the “Mark to Market” (M2M) rule in past few years, collecting billions of dollars when the time was good. Now they are saying this M2M rule is unfairly reflecting the value of bad loans, hurting the capital of banks, and thus hurting the economy. Why did not we hear all these arguments when they were collecting all the money? Essentially they are saying they like the excitement of ONS, but they don’t like (getting) AIDs? Why don’t they stay away from ONS at the first place?

Categories
CFA

Mark to market hearing

Reading Time: < 1 minute

A bunch of politicians (accounting newbies) questioning accountants
C-span video here.

All right, more finger pointing. Now people (oh, I mean Wall Street and their friends at Washington) are blaming mark to market (wiki), for the financial crisis.

This is almost same as blaming starbucks for one’s coffee addiction problem. Coffee, if consumed modestly, is good. But if one drinks more than 6 cups a day, he/she basically will get caffeinated.

Similar thing can be said to M2M, M2M is not the cause of this downward spiral, the overly leverage IS.

When politicians started play with accounting rules, I think rational investors will become really nervous.