If Mark-to-market Is Relaxed Shorts Will Get Killed!

Discussion in 'Economics' started by BlueStreek, Mar 7, 2009.

  1. It is a no-brainer, should have been done as soon as Obama took office, what morons we have in policy positions given the current dynamics MTM has to go!
  2. I dont see the ralationship between mark to market and the market movement. Would you mind explaining why the market should move up?
  3. Illum


    Rumor floated on what Thursday? Market lifted for a few minutes and sold off. Retail is gone, these games aren't working anymore.
  4. Lawmakers Propose Panel That Could Suspend Fair-Value

    By Ian Katz

    March 6 (Bloomberg) -- Two U.S. lawmakers want to create a regulatory panel that would be able to suspend accounting rules such as the fair-value standard that financial companies have blamed for worsening the global credit crisis.

    Representatives Ed Perlmutter and Frank Lucas introduced House legislation yesterday to establish the Federal Accounting Oversight Board, which would “approve and oversee accounting principles.” It would include the Treasury secretary and the chairmen of the Federal Reserve, the Federal Deposit Insurance Corp., the Public Company Accounting Oversight Board and the Securities and Exchange Commission.

    The panel, taking authority the SEC now has, would “give discretion to the regulators to consider the overall condition of the financial market,” Leslie Oliver, a spokeswoman for Colorado Democrat Perlmutter, said in an interview today. The Financial Accounting Standards Board, the SEC-supervised group that sets U.S. accounting rules, takes a “narrower approach,” she said. Lucas is an Oklahoma Republican.

    Citigroup Inc. and the American Bankers Association say the fair-value rule, which requires companies to write down assets to reflect market value, doesn’t work in illiquid markets. Fed Chairman Ben S. Bernanke, who would lead the proposed panel, said on Feb. 25 that fair-value is “a good principle” that can be improved. Treasury Secretary Timothy Geithner has said the rule enhances the transparency of company balance sheets.

    ‘Systemic Risks’

    “The current framework for accounting oversight, though well-intentioned, has proved inadequate and must be fundamentally revised,” Edward Yingling, the ABA’s president, said in a statement today. The new panel would “help address systemic risks that accounting standards can have on the economy,” he said. The ABA has asked regulators to ease the fair-value rule.

    By including the chairmen of regulators other than the SEC, the oversight board would “broaden the perspective” used to evaluate accounting rules, Oliver said. The board would submit reports to Congress at least once a year.

    “This sounds like someone is not happy with some of the standards we have and maybe this is an indirect end-around to try to get them changed,” Charles Mulford, an accounting professor at the Georgia Institute of Technology in Atlanta, said in an interview today. “I think this would make standard-setting more political, which is a step in the wrong direction. And those regulators have enough to do without overseeing accounting.”

    The SEC in a December report rejected calls to suspend fair- value, also known as mark-to-market. The agency said the rule should be improved and “did not appear to play a meaningful role” in bank failures last year.

    SEC spokesman John Nester and FASB spokesman Neal McGarity declined to comment on the proposed legislation.

    To contact the reporter on this story: Ian Katz in Washington at ikatz2@bloomberg.net.
    Last Updated: March 6, 2009 12:18 EST
  5. But Thursday's meeting sounds pretty serious to me.

    I’m a self-professed SKF gang banger. Every time a rumor about this thing surfaces, I get slammed and watch a week of profits disappear in minutes, literally! To date, it hasn’t been a problem because I’ve been able to double down once the move exhausts itself and make my money back and then some.

    But what if this thing actually gets suspended or modified later this week? Guys like me could keep doubling down only to find ourselves caught in a classic ‘Melt Up’.

    My simple analysis is that some change will absolutely be required or these toxic assets cannot be re-priced. But the conundrum will still be finding a price that works for both the banks and the private sector. Or maybe the change will simply allow bank’s balance sheets to be improved enough that they can carry on as zombies, avoiding further capital infusions …

    Can anyone offer some analysis as to what to look for coming out of Thursday's meeting and how to trade it?
  6. Thanks, I thought it was the mark to market of futures contracts that you where talking about :p
    I see it now, it's on OTC derivatives that would have an impact.
  7. SEC and FASB are beholden to the very powers that want assets on the cheap. The vulture community is very powerful...

    From Mauldlin this week:

  9. I don't see anything immediately happening. The power rests with the SEC.

    But who knows desperate times call for desperate measures.

    Personally I'm sitting on the sidelines until the smoke clears from the meeting . I don't want to get crushed holding shorts in some massive spike on a rumor - the implications of a suspension of the rule are too big imo.
    #10     Mar 7, 2009