The financial bailout bill is not just “dangerous, inflationary, unnecessary, and unconstitutional.” It’s also a lot more costly than the government admits, judging from the hypocritical arguments made by government officials. The Treasury Secretary in the past has resisted calls to loosen federal accounting rules, so-called “mark-to-market” rules that require mortgages to be assessed at their current fire-sale prices, rather than their estimated value if held to maturity. These rules can result in banks being declared insolvent even if few of their loans have defaulted.
Now, however, the government hypocritically plans to ignore its own mark-to-market regulations when buying up mortgage loans as part of the bailout, saying that instead of buying assets at their current “fire-sale prices,” the bailout will ”have taxpayers buy the assets and hold them at close to their maturity value.” If “mark-to-market” accounting is really as accurate as the government claims, then the government is going to grossly overpay for the worthless mortgages it buys, and taxpayers are going to lose tons of money in the bailout — far more than the government is admitting. On the other hand, if this accounting method is not accurate enough to be used by the government for its own purchases, then the government should stop forcing private banks to use it, since doing so jeopardizes their solvency, and the financial system as a whole.
Many commentators are now calling for relaxation of federal regulations mandating “mark-to-market” accounting (which requires assets to be valued at current fire-sale prices), in order to stem the financial crisis, including former FDIC Chairman William Isaac, the Wall Street Journal, John Berlau, Jeff Miller, Holman Jenkins, Newt Gingrich, and the Republican Study Committee
The SEC’s foolish ban on short-selling, a classic example of shooting the messenger, has now backfired, with people worried about the market falling investing in commodities like gold rather than the stock market, as investment manager Peter Schiff has observed. Investor confidence took a dive after the details of the bailout became public — not surprising when you consider the role that government incompetence played in spawning the mortgage crisis, especially by the very lawmakers and officials who are pushing the bailout (such as mandating risky loans to promote “affordable housing“).
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[...] Jenkins, and Newt Gingrich. The government insists that private banks use it, but hypocritically refuses to use this method of accounting itself. addthis_url = [...]
[...] Mae, and disregarded both logic and history in shaping his bailout plan. He has ignored inexpensive methods that might stem the mortgage crisis, like relaxing rigid federal accounting r….  There is no reason why taxpayers should trust him with $700 billion, given his incompetence [...]
[...] ignores less costly ways of propping up financial markets, and fails to consider regulatory reforms that might reduce the need for a bailout. It’s not clear why we should trust federal officials with $700 billion to buy up bad [...]
[...] and created the risk of future bubbles. It blindly ignored less costly alternatives and reforms of burdensome regulations that would reduce the need for a bailout. It gave officials $700 billion to buy up bad loans, even though government incompetence and [...]
[...] less costly ways of rescuing financial markets, like the RSC plan, and fails to consider reforms of burdensome regulations that might reduce the need for a bailout.  Why should we trust government officials with $700 billion to buy up bad loans, without any [...]
[...] alternatives to a bailout (see here, here, here, and here for examples), and potential reforms of burdensome regulations that would reduce the need for a bailout. They have left intact regulations and affordable housing mandates that contributed to the [...]
[...] to potentially much less costly alternatives (see here, here, here, and here for examples) and reforms of burdensome regulations that would reduce the need for a bailout. They have also done nothing to remedy goernment regulations and affordable housing mandates [...]
[...] have triggered the current financial crisis by artificially undervaluing mortgages and securities (making financial institutions appear insolvent).  Even the very government officials who have advocated those rules now hint that they [...]