The Relaxation of Mark to Market rules spurs rally ,not G 20

The recent move to relax the "mark to market" rules a step very long over due gave renewed hope that the credit crisis would be abating. Since Sarbanes Oxley the stringent "mark to market" rule have forced banks and other financial institutions to take premature write downs of assets . What was happening is that a lack of interest in a particular asset class was being interpreted as that asset having little or no value. This process became acerbated by the diminished volume in certain asset classes as the crisis brewed. A relaxation or tweaking of the rule would give financial institutions more operating margin to value loan portfolios instead of the no bid no value fixed rule. In simple term if you have your house for sale and no one makes an offer on a particular day that house according to 'mark to market" would be worthless on the close of that day. Now any one who has sold a house knows that you might have a diminished value but having no value is highly unlikely.

What is troubling is what took so long to recogize and act on this issue when it seemed so fundamental to the credit crisis? This reminds one of the unintended consequences so often of congressional action given legislation is often agreed to by people with little or no experience in the industry they are regulating. To some one in full grasp of the magnitude of the situation this should have been obvious and the first thing a regulator would have tinkered with not the last after spending over a trillion dollars .

So is Wall Street broken? : Part 2 the unwinding of Glass Siegel

So is Wall Street broken?

Recent events have seen the unwinding of the Glass Siegel Act and the reemergence of a pre Glass Siegel banking structure where Investment and Commercial Banking are once again under one roof. I don’t understand the argument that deregulation and the move away from Glass Siegel restrictions was the cause of the current financial crisis. If anything the clinging to the obsolete notion of Glass Siegel premeditated the demise of many of today’s financial institutions. Glass Siegel only worked because investment banks were run primarily as partnerships and the risk to your own capital put constraints on leverage and speculation. The demise of the old partnership style investment bank lead to spending of the publics money has led too more leverage and more risk taken. After all Europe had no Glass Siegel and their banks ,and investment houses have faired much better than their American counter parts in the current environment. The joint structure of investment banking and commercial banking together makes capital far cheaper than the highly leveraged investment banking model, but I suspect less profitable. It’s rather strange to be criticizing the demise of Glass Siegel while the current solutions all involve undoing all the separations between commercial and investment banking.

This cleansing process signals the end of the Bear Market that has engulfed US Equity markets since March of 2000. Firms that are not accountable and transparent will be put down. While the free market seems to be taking the hit for poor judgment and a lack of oversight. This should come as no surprise given the very people looking to expand government power by trying to clean up this mess are the very people that created this mess to begin with. Let’s all face it, its not like all the rules were not already on the books such as Sarbanes Oxley but apparently large political donors were granted exemptions.

too big to fail? Or perhaps a better question is, has there become a total abdication of accountability?

So how big is too big to fail? Or perhaps a better question is, has there become a total abdication of accountability? For some time it has appeared that regulators were more interested in protecting vested interests in the industry than joe average investor. The answer to everything has been to blame the lowly retail stock broker for everything up to the imminent demise of western civilization.
But the facts seem to suggest otherwise. Your broker at the end of the day for better or worse is the only person beside yourself that is responsible for what goes on in your account. Basically he or she has to pick up the phone.

Account representatives are held accountable thru two major rules 1) know your customer and 2) suitability. It is amazing that you and your broker are the only ones held to these standards. Yes firms have supervisory responsibilities but lets face it in the era of Sarbanes Oxley they seem to be falling far short .Basically applying different standards to large political contributors such as Fannie Mae and Freddie Mac .Given Sarbanes Oxley and industry grips about implementation costs It is incomprehensible that large firms like Lehman Brothers can have such opaque balance sheets.

The main focus of every investor right now should be financial transparency and again accountability. Over times firms that come clean and stay clean will be rewarded and like or not you may want to start with your local broker who is already sticking his neck out