Wednesday, October 01, 2008

I Solve The Financial Crisis

Examining the $700 billion proposal to prop up failing/failed businesses and investments is a rugged task, and is Congress capable of making the right decision?

Getting the views of the average person on the proposal seems futile. I could look at the specs and test results for a faulty nuclear reactor, but don't expect me to have a worthwhile opinion on how to fix a coolant leak.

I saw where incumbent 1st District Congressman David Davis issued a statement on why he voted down the proposal on Monday and his ideas for alternatives. It's a lengthy piece, which offers such ideas as:

* Net operating losses: Allow companies to carry-back losses arising in tax years ending in 2007, 2008, or 2009 back 5 years, generating a tax refund and immediate capital. Despite the presence of willing buyers, many firms with MBS are not willing to sell at such a huge loss. Such a carry-back provides a cushion for any such loss, making firms more willing sellers."

"* Suspend "mark to market" accounting: Direct the SEC to suspend the mark-to-market regulatory rules until the agency can issue new guidelines that will allow firms to mark these assets to their true economic value. The current rules contribute to a downward spiral as firms have to evaluate their assets not on the basis of their long-term investment but rather on a short-term mania."

Yep, that might just fix that coolant leak.

Since Rep. Davis showed much anger at his loss for a bid for re-election, can I honestly expect him to do much beyond hurling wrenches into the gears?

I've heard numerous references to the phrase "mark-to-market", which sounds like a kid's book title. Investopedia defines it like this:

1. The act of recording the price or value of a security, portfolio or account to reflect its current market value rather than its book value.

2. In terms of mutual funds, a MTM is when the net asset value (NAV) of the fund is valued upon the most current market values.

1. This is done most often in futures accounts to make sure that margin requirements are being met. If the current market value causes the margin account to fall below its required level, the trader will be faced with a margin call.

2. Mutual funds are marked to market on a daily basis at the market close so that investors have an idea of the fund's NAV. "

Hoo-boy. So am I now supposed to have the wisdom to crack the Da Vinci Code of Financial Miracles? Should those who squeezed finance rules to the breaking point be jailed at Gitmo?

A massive hurdle for any proposal from the Bush White House is their own track record for howling cries of "Emergency!!!!" and their feeble responses.

If we assume the crisis is real, then what to do?

Here's a survey which sort of shows off how snarled up this truly is:

A Pew Research Center poll released Wednesday found that 43 percent of all voters admitted that they feel "confused" by the proposed plan to stabilize the financial markets. At the same time, voters grasp that something important is happening -- 54 percent say, in response to another question, that they are paying "a lot" of attention to the bailout debate in Washington. Pollster Andy Kohut, the director of the Pew Research Center, said that it was virtually "unparalleled" to have this simultaneous level of interest and confusion in a policy debate. "It's a tough one to get into the nitty-gritty of," said Kohut. "It is not like gay marriage that is easy to grasp no matter what your point of view is."

Great. Now people figure out that whirling in a circle makes you dizzy.

Old jokes boil it down: A man walks into a doctor's office and tells the doc, "Hey. my arm hurts when I do this (wiggles arm)! What should I do?" The Doctor replies, "Don't do that."

Problem solved. Next patient.

POSTSCRIPT: All of the above can be also filed under "We are in a rushing river composed of fecal material and have no oars."

POSTSCRIPT II: It's going to get a little worse, then a little better. (Maybe this is just another diagnosis from the doctor mentioned above.)


  1. Anonymous1:20 PM

    "We are in a rushing river composed of fecal material and have no oars."

    And the GOP is shouting "come on in the water's fine!"

  2. Anonymous9:46 PM

    This crisis could end in 48 hours if we take 2.5 trillion and pay off all credit card debt in this country. By doing this banks would get 2.5 in relief, 2.5 of burden would be taken off the backs of struggling families Then set 2.9% interest rate cap on purchases for the next 6 months. This would cause a HUGE buying spree and would FLOOD the american market with nearly 800 Billion in purchases within 6 weeks.