Phil,

I couldn't agree with you more. When the government and press are pushing for the same thing SO AGRESSIVELY, there is something wrong.

Luckily the American people have been very vocal and critical of this and our voices are being heard.

Thank goodness for those in the press who are working to provide truthful and unbiased reporting.

Remember WorldCom? Remember Enron? Didn't they cook their books too? Why should we allow banks to cook theirs? Of all places, banks should be the most honest with their books...they have too much to lose if they cook the books.

wow - me too - thanks for the post

This bailout - buyout - rescue - whatever you want to call it - is the worst thing that could happen - credit drying up is something we the people can handle.....addicted to sp ending...please watch this video...
http://www.youtube.com/watch?v=JyYciV4Cc...

Phil pleae read FASB 157 which is the controlling document for this matter. While what you say has a gut level appeal it does not reflect actual ecomnomic conditions. Take this past week the market went down by over 800 points one day and up 500 the next. So which day was the market value? How would you value a barrell of oil. Based on the spot market price that has chanaged by $50 over the last few months. Should it be valued at the the $150 you paid 2 months ago, the $100 it is worth now or the $120 that you have it contracted for in the futures market?

I read FASB 157 and I believe my comments still hold.

First, your oil question. If you contracted to sell the oil in the future for $120 then the value of the asset would be $120 times the number of barrels. You have a contract for that. If you paid $150, then you have a $30 loss. The current market price is irrelevant since you have already locked in the buy-price and the sell-price.

But MBS and housing are a bit different. The return from an MBS is paid by the homeowner paying their mortgage. If they default on that mortgage, then the value of the MBS must drop since it has not only lost an income stream but foreclosing on a house is particularly expensive and will draw money away from the other mortgage income streams.

Plus, housing is not quite the volatile asset category as a commodity. While in some housing markets the price of housing has dropped dramatically, the price of houses is usually calculated monthly by comparing this years prices to last years prices in the same month. In other words, the value changes much more slowly.

In California, for example, there was massive speculation in some markets, which resulted in a 30-40% decrease in the value of the property. If we look as historical housing prices, it is unlikely these properties will recover that value for years. Some analysts even say prices are still high. This fact needs to be reflected by the bank.

There are markets all over the country where this has happened. There are entire neighborhoods abandoned in Michigan. Vegas and area in Arizona are grossly overbuilt. Miami has new condominium developments out the wazoo. These mortgages have all been bundled into MBS (by pseudo-government entities Freddie Mac and Fannie Mew primarily), which are not worth what they were originally sold for. The banks should reflect this disparity.

But bankers do not want to admit these properties have lost value. They don't want to admit some of these properties are going into foreclosure. They don't want to admit that there MBS (mortgage backed securities) are filled with interest-only loans, which will reset to much higher payment levels in the next few months, which will result in more foreclosures.

I understand what you are getting at: how to you determine the market value of a fluctuating asset class? But houses are not stocks or commodities, both of which fluctuate on a daily basis. If the market has dropped significantly on the houses that have mortgages bundled into an MBS, that needs to be reflected in the balance sheets of the banks.

As I said before, the bankers are resisting putting the actual market value for these MBS on their balance sheet. They want license to deceive. We should not let them.

You must have read quickly since sfas 157 is 84 complicated pages. In addition you will note that on the AICPa website today that they have modified that particular rule per the SEC. You will also notice that market value of of most assets has a floor and a ceiling and there are over 80 ways to value market for different assets. I don't know your financial background but as a CPA for over 35 years I can tell you how these things are done. There is nothing set in stone they issue an exposure draft get feedback, discuss, reissue until they get a majority vote on an issue. Look at how many opinions have been superceided over the years. By the way what exactly is the market value the entry or the exit value. For example if you have a used car you trade in that has a trade in of $10,000 and the dealer will sell it for $12,000 what is it's value?

Phil if you are really interested in learning something about this subject hers is a flyer I got today on a free online seminar on the subject.

Sign to Today! http://mhhe.com/dbm/rdr.pl?p=101970402&a...

Webinar Title: Integrating Fair Value Into Your Intermediate Accounting Course

Content:
The historical cost principle is the basis of measurement for most assets and liabilities. Often overlooked, though, is that there are over 40 instances in GAAP in which assets or liabilities are required or permitted to be measured at fair value.

The FASB recently issued two Standards related to using fair value in financial statements:

SFAS No. 157, establishes a framework for measuring fair value whenever fair value is called for in applying generally accepted accounting principles.
SFAS No. 159, gives a company the option to report some or all of its financial assets and liabilities at fair value.
In this online webinar, David Spiceland, Mark Nelson, and James Sepe will take a closer look at the content of these two important standards, how they can be covered in the Intermediate Accounting course, and where the profession may be headed with regard to fair value.

When:
Monday, October 13th, 2008, 12:00 pm (central daylight time)

Cost: FREE

Signing up is easy - just go to this website:
http://mhhe.com/dbm/rdr.pl?p=101970402&a...