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Politics, Work

A wild guess

10.03.08 | Comment?

Because I get irritated by all the anti-mark-to-market bloviating going on, here is an apposite observation by Pierce Scranton, Chief of Staff to the President’s Council of Economic Advisors (feel free to discount any and all of his opinions if you: (a) hate advisors, (b) hate chiefs of staff, (c) hate the gubmint, (d) hate the President, (e) hate economics):

But our fear is that by suspending mark-to-market, you are masking the problem. What matters for financial institutions right now is their liquidity positions. If they are unable to make good on something that requires near term liquidity, and they are relying on something they can’t sell in the market as collateral, that just masks their problem. Mark-to-market granted has some merits. So does the SEC saying we’re going to give you some time. The bill provides for a study and report on mark-to-market. If suspending mark-to-market would be effective, that authority is included in the legislation. The last thing we want to do when there is a lack of confidence in financial institutions is to prove an accounting mechanism for them to say “We’re just fine.” The market is going to see right through that, which would breed more distrust. [my emphasis]

I think over the next ten years, the revenue the government will make on the “bail-out” will have a significant effect on reducing the deficit and national debt.  It’ll be an indirect taxation of foolish institutional financial gambles, and the citizen who will therefore avoid (partially) the massive tax increase that must come some day, due to our massive national debt, will be thankful.

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