The Wall Street Come Back - Due to SEC Possible Change of Accounting Rules Mark-to-Market

While the pundits threaten and promote Paulson's bail out plan, there are actually other things going on which Wall Street seems to like.

"News that the SEC is working with FASB [Financial Accounting Standards Board] on 'fair value' accounting rules that could delay implementation of the onerous mark-to-market provision are giving stocks fresh legs higher," according to analysts at Action Economics

From CBS Market Watch.

SEC and FASB in negotiations:

The Financial Services Roundtable, a lobbying group representing the largest financial services firms, is also urging the SEC to change the rule. The Roundtable is urging alternative definitions for fair value in illiquid markets that focus on the long term value of a security if the security does not require immediate liquidation

This is something I mentioned and sounds like a reasonable thing to do.

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see the other part of the bill - they are using warrants

SEC rule clarification.

Ok, I think I have my head wrapped around this. The problem is the banks are under enormous pressure having to immediately write down the value of real estate and mortgages (they claim) so by not forcing them to evaluate the asset on current market value that means they would immediately up their balance books and the theory is that would immediately unfreeze the credit markets.

Then, the next wage of the warrants looks like it would work to get the assets plain off the books with another type of exchange.

In terms of unfreezing the credit markets, I mean anything sounds more plausible than Paulson's "give me gobs of money to do with as I see fit", which is still the crux of the bill.

Republicans had another one, which is a tax holiday to repatriate offshore capital (which is massive because multinationals have it all offshore to avoid taxes)...
that was actually part of an old plan which was defeated but they also wanted to change the tax law to no longer give tax incentives to keep capital offshore in order to lower their global (US) tax bill.

I don't know if that would have any real effect in the credit crunch but it sure beats giving Paulson gobs of money and also spreads the actions over a large sector vs. this one Goldman Sachs ex-Ceo.

I think to get something through immediately they should simply pass a combo of recommendations as a temporary fix to buy time to get a true solution that's long term through.

Obviously getting any policy that is based in any reality from any expert is impossible with this Administration and Congress so mixing it up to me isn't a bad idea.

here's another summary:

And speaking of mark-to-market, this accounting issue once considered to be obscure played a prominent role in the House floor debate. Louie Gohmert (R-Texas), Darrell Issa (R-Calif.) and Jeff Fortenberry (R-Neb.) all correctly noted that if Treasury Secretary Hank Paulson and regulators would simply let these securities be valued at the price Paulson wanted the government to pay for them — instead of the last fire sale price per mark-to-market rules — it would largely do what the bailout intends without putting taxpayers on the line

I mean which is worse, letting corporations over value an asset on the books or let Paulson plain outright buy them way overvalued and now the US taxpayer is stuck with them.

I'll go for suspension as a temporary fix if it works and then work on the real solution once the credit markets unfreeze.

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