[bilbo0s]

The quants are going to go to town on this one. This bill gives the SEC authority to suspend the practice of marking to market. Bad idea. That makes this bill just a big money giveaway in practice. Transfer of wealth basically.

Further, the FDIC is already running low on funds, we should be slow to make new promises when we are already uncertain with regard to meeting present obligations. Additionally, raising the limit on FDIC insurance will make it harder to determine when a bank is in trouble. Now I am not naive, I am sure that was the idea behind raising the limit in the first place. But the less educated among us actually believe this was done to protect their money.

Lastly, $150 billion in tax cuts? These people really need to get some cost accountants.

[newt0311]

The SEC already had the authority to suspend mark-to-market accounting. This bill just re-affirms it. Furthermore, mark-to-market is an accounting technique.It may result in fraud but there is no "transfer of wealth" about it. Furthermore, if history is any indication, corporations can always cook their book if they really want to.

The FDIC is indeed running low on funds and raising the limit at this point in time is a bad idea. However, the FDIC limit does not hide the financial health of a bank or have any direct impact on it for that matter. The limit governs what happens to customer deposits after the bank fails. Having a higher limit may indirectly help troubled banks by placating their depositors and convincing said depositors that their money is safer.

About the tax cuts. The $150 billion is a drop in the bucket. If you really want to bring costs in line, take a very hard look at Social Security, Medicaid, Medicare, and Defense spending. Everything else (except now this bailout) is a rounding error compared to those.

[bilbo0s]

Accounting fraud is exactly what will make this whole thing degenerate into a transfer of wealth. Think about it, they can cook the capital ratios so that not only the bonds, but now even those CDS's that they have are worth X, when they would fetch Y at market. This gives them more liquidity, yes. But it is an illusion. Those CDS's are still as precarious as they were before, so are the now revalued bonds that they carry. Nothing changes, except the balance book. Add to this a guaranteed market for these assets, the taxpayer and surely you must see the potential for fraudulent profit taking in this scenario.

Early indications that a bank needs to be looked at comes to the FDIC because people with more than $100000 start moving excess money to different banks. FDIC starts to look at them, and that is where the lowest form of all quants comes in. The "shorter". They get wind. I don't know how, but you and I both know it always happens, and the bank's stock starts a death spiral. Putting more pressure on their capital ratios, which have to factor in cheap stock now. Also, in fractional reserve banking, the fees charged by the FDIC to the banks SHOULD depend on the amount that the FDIC is insuring accounts for. There is NOTHING in the bill about raising fees. I'm sure we can all imagine that fees will probably not be raised, as the idea is to help with liquidity, not hinder it. So right there the banks just got something for nothing in terms of insurance. Helping their financial position appear safer.

Maybe we are talking about two different things. Could you please explain why you believe this does not help the banks to appear financially healthy longer?

If you consider $150 billion a 'drop in the bucket' then salud! I think $150 billion here, $150 billion there, and pretty soon you are talking about real money. Consider the possibility that you believe it to be a small amount because you agree with this bill. What if we gave $150 billion to fund welfare? How about we give $150 billion to fund the salaries of H1B workers? Or we blow $150 billion on 2 toilets for stealth bombers? Is it still a drop in the bucket?

[APLonDrugs]

Well, on the point of spreading the 150 billion around, here and there… what about including young tech. start-up firms as well? :-)

[timr]

"if history is any indication, corporations can always cook their book if they really want to"

Right. So why bother with accounting standards at all? They're just going to break the rules anyway....

[newt0311]

Because accounting standards make financial reports readable by standardizing them for the audience (investors). Furthermore, accounting standards make it harder to cook the books, just never impossible.