US Mark to Market rules relaxed

chucky wrote: »

so does that mean that the bail outs for the bank debts are actually worth something now and the tax payers have made a profit?

no it means the banks have us by the b*lls now.

why do i say so? ......

PLAN 1: these 'assets' will now be marked to model to deliberately boost their value on paper to meet reserve requirements.

then they wont be able to sell it on the open market unless they have a mug to buy it.

PLAN 2: the next plan will be to conjure a mug to buy it. ie the tax payer. but the tax payer wont initially play ball saying find a buyer or atleast do a private-public partnership in the form of a 'bad bank' plan or 'TALF' or 'bad/illiquid assets insurance scheme'

PLAN 3: get leverage on the private-public partnership scheme by buying the govts 'insurance/guarantee' at 5% cost of the mark to model assets. then have 1:20 leverage in bad bank or even better in TALF when coughing up just 3% maybe. the banks themselves can buy back the assets with govt backing and leverage or their subsidiaries or quid pro quo via other related banks can deliberately over bid at any auction under 'bad bank or TALF' schemes and get near 100% of mark to model valuation for bad assets. now because of the govt backed leverage they get to play risky. remember they paid 5% but got 100% funding (with govt chipping in 95%)

now if the assets go bad by the time of maturity of the CDO or MBS etc then the institutions that would have bought under 'bad bank / TALF' schemes would have just coughed up 3-5% of costs because of govt backed leverage. any profit or sale more than the 3-5% of costs paid by the institution buying under the 'bad bank program / TALF' will be a profit for them while taxpayer bears the losses for the rest. (plus the original bank that sold them to the bad bank / TALF scheme would have got the near 100% money back)

win win situation for the institutions involved. only the tax payer carrys the can twice over - once at initial sale under bad bank scheme then again when the losses are later uncovered and govt carrys can because of 95% leverage costs borne by govt.

the only chance of govt making money is if they are later sold for more than the 'mark to model' valuation. which i think is very unlikely.

plus the govt carrys the can for the extra insurance bought for these transactions. . institutions buy CDS for these transactions going bad from guess who institutions like AIG and other insurers, these might even be naked CDS or where the institutions involved in the transactions know that the CDS cant be paid out incase of failure and still indulge in these transactions (ie fraud) etc. and guess who will be the counterparties for these transactions, again the same chaps who sold these MBS etc. when these go bad who pays the bailouts / insurance payouts. again the govt. THIS IS ALREADY HAPPENING***. so it will happen again because OTC transactions are not being banned even now or are not being forced to exchange traded status to monitor them and get regulated more accurate valuations.


***

AIG: Before Credit Default Swaps, There Was Reinsurance

"What do many corporate buyers of insurance have in common with American International Group? Perhaps more than they would like to admit. Like AIG, many companies in the past few years have bought finite insurance, which transfers a prescribed amount of risk for a particular liability. What regulators now want to know is, how many companies, like AIG, have used finite insurance to artificially inflate their financial results?"

Infinite Risk?
CFO Magazine

June 1, 2005

"In the regulatory world, a 'side letter' is perhaps the most insidious and destructive weapon in the white-collar criminal's arsenal. With the flick of a pen, underhanded executives can cook the books in enormous amounts and render a regulator helpless."

Fraud Magazine

July/August 2006

there is nothing wrong with reinsurance. most companies do that i guess. but it is wrong if they are insuring stuff that they know will definitely be defaulted on. that is defrauding the insurer who in turn gets bailed out by tax payers for making insurance contracts knowing they will be defaulted on.

also the article was referenced from http://us1.institutionalriskanalytics.com/www/index.asp?submit=Professional#advisory

and see their profile, they definitely are not lunatics
http://www.institutionalriskanalytics.com/team.html see one of them on CNN being interviewed for their views http://money!!!!n.com/video/news/2009/01/20/news.012009.goodnoshot!!!!nmoney/ and many other videos interviewing them on cnn money program and see articles on cnn money referencing their opinions among quite a few other articles quoting them on news networks.

also if denninger of the ticker forum was a lunatic then he wouldnt have got this years journalism award and neither would he have been invited to give evidence before the congressional committee on these matters. you can google for the links of those events if interested.

i guess you might disagree about their assessment of the situation. no problems. to each his own.