OXYMORONS at the GATE:
From mark-to-market anomalies to ROCKET SCIENTISTS blowing up on the pad
oxymron 101: Mark-it-to-market
The Fed chairman says 'they' cannot abandon mark to market rules because it could undermine the creditbity of the system...
Yet in this NEW $1trillion plan he makes a real point of saying that mark-to-market prices are distressed and hold-to-maturity prices are higher. I do get that. That has been MY ENTIRE POINT. But I DON'T GET that The Fed/TREASURY WANT TO pay the HIGHER PRICE for this paper when they buy it from banks that might HOLD IT AS MARK-TO-MARKET PRICES.
That will give them an INFUSION OF CAPITAL. Why just let them USE discretionary pricing (NOT mark-to-market) and mark it up themselves!! and keep their DANG PAPER!! Meanwhile We'll keep our $1trln!! Presto change-O!.
Isn't that an admission that mark-to-market is a flawed practice? It has led to assets being undervalued?
Isn't mark-to-market THE PROBLEM far from being a source of stability or credibility for the system?? OXYMORON!!!
...and if another way of valuing these assets can be FOUND MAYBE JUST MAYBE those assets could stay RIGHT WHERE THEY ARE and rise in value? No?
I have made several suggestions as along this line I will leave it to you to connect the dots anyway you want.
IF mark-it-to-market is so great why does it work so badly? Since it works so badly why say credibility depends on keeping it? OXYMORON OXYMORON OXYMORON
Inquiring minds want to know!
oxymoron 102: ROCKETMAN
The rocket scientists got us into this mess with their packaging, credit wrapping, credit enhancing tranching of mortgages and so on. Now Ben Bernanke, Fed chairman, and a bit of a rocket scientist himself, proposes getting relief by using rocket scientists who will employ another largely untried thing, reverse auctions.
Hey FORGET THAT HUGE CYCLOTRON in SWITZERLAND. The real black hole, the real anti-matter is RIGHT HERE IN THE USA!!
It's the infamous CDO particle.
Ah yes but to use rocket scientists and their auction experimental plan you need widespread participation etc....from the fakirs, err bankers. One upshot is you don't want to 'piss-off'' the people you need to participate in auctions, reverse auctions. Experts in auctions from around the world want to come and dabble in our little $1trillion experiment with taxpayer money RIGHT HERE in Iraq. Oops did I say Iraq? Oh, I didn't mean THAT experiment. I meant the one in mortgage land across this great great county with amber waves of grain that are now being used to make petrol while taco prices soar. But let's not worry about that side-effect either. Let's buy under-priced mortgages at banks so we can pay more for them and sit and back and wait 15-20 years and see if we got our money's worth! Do not DO NOT punish the banks that made these rotten loans and do NOT DO NOT cap the salaries of the men who ran and now run these banks that WILL record an earnings surge when we pay above market value for this paper.
YES!!! ROCKET science pushes CEO pay into orbit!! I love it!!! America IS a great place where even sinners go to heaven!
Alternatively, and this is just that an alternative plan or universe if you will... if we grabbed the CEOS by the scruff of their necks and threatened them with prosecution under Gramm Leach Bliley I wonder if we wouldn't get their attention as we took capital stakes and anything else we wanted for their sorry and all but backrupted buttts?
...just an alternative version that's all...
I don't see the need to pander to these guys.
Bernanke is far too much MR Nice guy.
Paulson is lining the pockets of his buddies.
No one can get a capital stake? Guess what? Goldman is and from the Golden boy himself Jimmy Bufffet...wasting away again in Margaritaville...or OOPS sorry that's Warren Buffett. I wonder if he used his corporate money or part of that stash he was going to give to Bill and Melinda for charitable purposes?