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 Oh the manipulation

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milliam
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PostSubject: Oh the manipulation   April 9th 2009, 21:45

Headline reads:
"Wells Fargo earnings surprise sends market surging
Banks lead market higher after Wells Fargo says it will post $3 billion profit; Dow jumps 246"

Yeah, of course their earnings are surging. The government just let them value their assets at whatever they wanted them to be. So those toxic assets that we all put the billions out there to buy, twice, are now not toxic again. Basically, they could have changed this "mark to market" thing back then and rigged the market not to fall instead of throwing our money at the problem. Either way, this is just a prop job and its not going to work in the long run.

This deal of changing the mark to market ruling basically allows the bank to lie about what they are holding. The government post poned it several times before so the banks wouldn't basically have to say they were insolvent. I know they are trying to protect the economy, but its just another case of the government keeping the common people in the dark...letting them know, or think, what they want them to think.
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vg0va3
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PostSubject: Mark to Market   April 10th 2009, 10:54

I don't agree that removal of mark to market allows banks to "lie" about their asset value.

The assets that banks hold are not maturing today, so why should they be valued as if they are.

(FASB) Statement No. 157 “Fair Value Measurements”, was key to the spiraling devaluation of financial stocks in the market.

For instance, as company A drops value due to their short term portfolio and company B owns stock company A, should company B reflect the affect of company A's short term portfolio impact?

Only if company B plans to divest in company A today.

Otherwise, the impact will drive down company B's value which could in turn impact companies C-Z. What did that accomplish? You as a long term investor have been damaged because of company A's short term portfolio. A portfolio that company A can simply sell of if it becomes a financial drag.

I am not saying mark to model is better, just that mark to market was an overreaction to Enron. And as with most other government overreactions, the consequences were terrible.

Besides, Sarbanes-Oxley was “supposed” to eliminate much of the type of fraud that was lead up to mark to market.
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milliam
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PostSubject: Re: Oh the manipulation   April 10th 2009, 11:32

Yeah, Sarbanes-Oxley was supposed to take care of lots of the bad stuff. If left alone and allowed to be followed, it might have done just that.

As for your argument on the mark to market...I would agree for the most part, but we're talking toxic finanacing stuff here. These assets are worthless and have been leveraged to infinity. They've taken mortgages that they knew weren't going to be paid back and used them as collateral to borrow even more. With your example of the stocks, I can see your point, but with the stuff they are holding, I call it a lie myself.

Either way, I do believe the government is trying to prop this market up. I can see their desparation, but I still see it as a cover up to the American people. Its just prolonging a bad situation.
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PostSubject: Re: Oh the manipulation   April 10th 2009, 19:13

Right now I'm wishing I had one of those "smiley eating popcorn" smilies! This is gonna be fun - and educational for me!
Smile

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milliam
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PostSubject: Re: Oh the manipulation   May 21st 2009, 12:41

What a whirl wind banking crisis we have had.

First, the housing bubble busted and the banks got caught holding toxic assets that were backed by these stupid mortgages.

Paulson comes out and says the world is going to end if we don't bail these banks out and buy these toxic assets from them. The bill is voted down, the stock market is pushed down (with lots of help from the government IMO). The public gets scared and the bill passes. $700 billion of the taxpayers money approved to buy the toxic assets.

The money goes to the banks (as well as other institutes that have nothing to do with this Evil or Very Mad ), and the stock market continues to crash. Does the money buy the toxic assets???? NO!

The banks continue to struggle and its about earning time. So the government steps in and changes the rules on how the banks can list these assets. All of a sudden, the struggling banks are announcing record breaking profits. We're talking an overnight change here.

Meanwhile, the government is doing their stress test. During this time, they prop the banks up and make sure they don't fall. The numbers come out and several of the big banks need billions of dollars to make sure they can handle the bad economy.

Bank of America needs $33 billion according to the test. So they go about getting this cash by selling more of their stock. 1.25 billion shares. This is called dilution. It follows most any thoughts on this process...supply and demand. The higher the supply the less the demand. You would think this would lower their stock prices (it usually does), but Bank of America's stock stayed strong. Once again, IMO, the government propped them up so they could sell this stock at a high price.

So, when will the government stop propping up these banks? Its going to be a big fall from here IMO.

Here's the kicker...All of the banks still own these toxic assets!!!!! affraid
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catocom
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PostSubject: Re: Oh the manipulation   May 21st 2009, 21:02

oh don't forget the big 'transparency' promises.

pfft, knew that was a lie to start with, when it comes to them and money.


one thing is for sure...we've helped slow the spend in DC...bill-wise, I believe.
Can't slack up now.
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