Re: We will never agree on this and therefore it is pointless to talk about!
 

If you're not discriminating between Rhode Islanders and others, you not engaged in something which definitionally burdens interstate commerce. I don't recall the law because it's been a few years, but that may move you from heightened scrutiny to rational basis review.

But if you exempt all of Providence but not Fall River, which is closer and on the other side of the state border, how do you explain that?

Re: You can't spell v-o-l-a-t-i-l-i-t-y with a "why?".
 

It depends on whether regulatory capital calculations follow the accounting. I don't know, but assume so. If the change means they have more regulatory capital, or less uncertainty about how much reg cap they will have at the end of the next period, then yeah, it frees up cash.

Re: You can't spell v-o-l-a-t-i-l-i-t-y with a "why?".
 

Unless they are actually insolvent, notwithstanding the accounting.

Re: You can't spell v-o-l-a-t-i-l-i-t-y with a "why?".
 

I've read this thread and am offering no comment except to say this:

Ever argue with your wife or girlfriend?

Yeah, it's kind of like that.

Not being sexist. Just sayin.' You aren't winning.

Re: You can't spell v-o-l-a-t-i-l-i-t-y with a "why?".
 

one difference is you know if you post pix of that Chechan school attack Ty will explode and delete them.



Hmmmm.


Actually knowing how to push the lady's button is exactly what it's like dealing with Ty.

Re: You can't spell v-o-l-a-t-i-l-i-t-y with a "why?".
 

You use the shocker on him?

Re: You can't spell v-o-l-a-t-i-l-i-t-y with a "why?".
 

As we used to say when we were kids, well duh. That would be a little surprising, though, given that Geithner and the banks themselves have been repeatedly saying otherwise.

Re: You can't spell v-o-l-a-t-i-l-i-t-y with a "why?".
 

They both have strong incentives to say the banks are sound.

Re: You can't spell v-o-l-a-t-i-l-i-t-y with a "why?".
 

True. But they also both have access to information to make that determinatoin. Unlike everyone who is saying banks aren't sound. Moreover the conversation at hand is whether the banks are insolvent with the revised accounting rules.

I hate politicians!
 

No new revelation, but politicians are such miserable hypocrites.

So that yahoo R senator from Texas is telling Coleman he should appeal even if it takes years. And you know he'd be screaming his head off if Franken was behind and suggested appealing. And the Dems would probably be pushing for endless appeals if Franken was losing.

I hate them all.

you may now return to your regularly scheduled political arguments.

Re: You can't spell v-o-l-a-t-i-l-i-t-y with a "why?".
 

I'm not reading the latest pages of stuff, because I've weighed in earlier on mark to market, but the answer as to whether moving from mark to market frees cash at the present time is that it would to the extent assets are valued at substantial discounts to their ultimate payouts, as long as the risk that no payout occurs remains under control. The last part is the issue right now and I think you have to rely on government bailouts to keep from marking down tons of absolute crap.

The more interesting element of a move from mark-to-market is that it would have substantially impaired bank's ability to go wild in the market upswing. Banks were lending based on capital that represented phantom gain.

So one can think of a move from mark-to-market as freeing up current lending capacity, but my impression is the big banks are so damn gun-shy right now that they'll be fucking useless to the economy for a long time. Besides which, if you can't get a multi-million dollar bonus, why show up to work at all? (A sentiment I've heard expressed several times).

The more interesting element of the move is that it provides a lot less ability for a bank to get a $1 gain from the bond markets and turn it into $10 of loans, setting up the sprial that doesn't end until the house of cards collapses. Banks lending based on mark-to-market accounting ARE derivatives. That's the rub.

Re: I hate politicians!
 

Dems could have pushed for more court battles in Bush v. Gore but didn't.

We're holier than they are.

But I've been wondering when people are going to get really upset about this. It is a travesty. You guys are truly patient.

Yeah, Iowa!
 

Re: I hate politicians!
 

After the Supreme Court ruled?

Re: You can't spell v-o-l-a-t-i-l-i-t-y with a "why?".
 

That's bullshit. It will be a long, slow process and lots of other things will be happening, all of which may free up credit. If you think you can say, "Well, someone can determine exactly how much each bank can free up, add that all together and tell us exactly what the benefit is," you're just being a pain in the ass. And frankly, on these issues, you're being a pain in the ass.

Jesus, you're on a roll lately. I said your quote was so broad that it can apply to pretty much anything--from a reporter trying to relate the President's cold to a .003% dip in the market, to 9/11. If you want to apply it to little, itty bitty things, knock yourself out. But once you get into major policy changes, upward and downward swings are surely the result of such changes. Can I or anyone else tell you what percentage of the change occurred as a result? Of course not. But your little quote really doesn't say much.

Whatever.

TM

Re: I hate politicians!
 

Yes, there were additional options and additional cases. But we really don't want to go back there, do we?

Re: I hate politicians!
 

You don't really believe this, do you? Give me a break.

The problem is the bastard child of Roland Burris and Minnesota law. During the Burris thing, Dems in the Senate staked out the position that they would not seat Burris until he was certified under state law. So now they can't do differently with Franken. And under Minnesota law, Coleman's challenge of the election gets heard before Franken gets certified.

When the court rules that Franken has more votes, it will get interesting if Pawlenty refuses to certify him as the winner, since he doesn't have a basis in state law to do that.

Re: You can't spell v-o-l-a-t-i-l-i-t-y with a "why?".
 

I am just a slack-jawed yokel, so why don't you spew some more stupid insults my way. I clearly deserve them for calling your rhetorical question preposterous.

You sound like someone too thin-skinned to be a lawyer.

Re: I hate politicians!
 

I need to use more smilies.

Or, someone needs to get a sense of humor.

Re: You can't spell v-o-l-a-t-i-l-i-t-y with a "why?".
 

Is this right? I mean, did get banks get big mark-to-market gains on their CDO portfolios? It seems unlikely, as fixed income securities typically only have big gains in falling interest rate environments, and there weren't really big interest rate moves until after the crisis hit. I thought the real benefits for the banks were (1) regulatory arbitrage available from holding AAA bonds that counted as tier 1 capital (resulting from holding them in the first place, not from "phantom gains") and (2) profitable fees from putting them together.

But maybe I am wrong.

ETA: But your overall point, that booking mark to market "gains" on fixed income securities raises as many issues as booking "losses."

Re: I hate politicians!
 

Honest question, as I haven't read anything about it: He *doesn't*, or the Dem's interpretation of MN law says he doesn't?

Re: You can't spell v-o-l-a-t-i-l-i-t-y with a "why?".
 

To the extent MtM allowed banks to book gains, it wasn't on "regular" CDOs, it was on derivatives. I have no idea if this was a big piece of bank profits.

You are correct that profits from CDOs of MBS, auto loans, etc., were likely not producing outsized MtM-based gains, although there were probably some gains, presuming they purchased (some of) the CDOs at some discount to par.

Re: You can't spell v-o-l-a-t-i-l-i-t-y with a "why?".
 

I sat in on several sessions where traders were showing banks how to use CDOs to essentially arbitrage your return. Not my area, so I just asked a lot of questions and the folks I work with never bit. During the boom, there was a significant spread between the ROI of the big banks and the small banks, and my understanding was a lot of it came from trading activity (also from non-bank financial products). For the most part, commercial lending on your own assets has stayed profitable straight throughout; it's the other things happening with those assets that have caused losses, and the residential lending.

Re: You can't spell v-o-l-a-t-i-l-i-t-y with a "why?".
 

I'm being a pain in the ass? This is an issue about which reasonable people can differ. FASB's board split 3-2 on it, right? The question is, how do you weigh the potential downside to letting firms have more discretion in doing their books* against the potential upside of freeing the banks to lend more. I'm willing to acknowledge that I may have the balance, and asked which facts we should look at when to decide whether the change was right. I didn't ask you to "determine" anything "exactly" and do a bunch of math and all that shit -- I just asked how you'll decide in the future whether you were right. Clearly, your mind is mind up, and that's not something you'll ever do. I was trying to stop discussing the parts of this that we disagree about and instead move to describing a world in which we could both agree that you're right, but you'd rather just be disagreeable.

* Since I was reading Vanity Fair this morning, here's a pertinent graf, in the context of gated funds:

Quote:

Others in the industry also say that preventing investors from taking their money out is nothing short of an admission that the assets in the fund can't be sold as they are currently valued. One manager tells me that he has a debt security valued that he is valuing at 50 cents on the dollar. He knows another fund that is marking the identical security at 90 cents on the dollar. This means that the headline number for the industry -- down 18 percent -- may not be an accurate read. (In fairness, this is probably not an issue for hedge funds that deal in actively traded securities.) One manager laughs when I ask him if 18 percent is really the right number. "It's way worse," he says. "Way worse."

April 2009 VF at 98-99. So I don't deny that there is some potential upside to relaxing the rule, but there is clearly some downside as well.

If by "major" you mean relatively large daily fluctuations, then I disagree. If you're talking about months or years, then sure. But you're not.

Re: You can't spell v-o-l-a-t-i-l-i-t-y with a "why?".
 

I didn't think I was insulting you by pointing out that your premise was beneath you, nor was I bothered by your post. If I insulted you, I'm sorry.

Re: You can't spell v-o-l-a-t-i-l-i-t-y with a "why?".
 

At the risk of repeating last week's tedious debate, there is no dispute about this. The dispute is about whether asking this question is the right way to value these fixed income assets at the moment.

Re: I hate politicians!
 

Here is what I understood, which obviously could be wrong: The court's mandate right now is limited to figuring out who got more legal votes. Based on various rulings it has made, it's pretty clear that Franken will emerge with more legal votes. Coleman can appeal various rulings concerning the court's application of state law to the Minnesota Supreme Court, but the observers I'm aware of don't think he has a shot of getting the tally reversed there. He could then appeal to the U.S. Supreme Court, but that would be seem to be a long shot. Assuming that the ruling of the court is affirmed, I don't believe that Pawlenty has any basis to make his own judgment about the numbers of legal votes -- I believe that his task is ministerial.

However, Coleman also has this equal protection argument about the different standards allegedly applied in allowing absentee ballots in different counties, and it's not clear that he can raise it in the current proceeding. IIRC, the court seems to think that question is beyond its current jurisdiction. Coleman might try to raise it in his appeals, but I believe that he might bring a challenge to the state proceeding in federal court to raise it there. If he does that, Pawlenty will have a plausible basis to say that he should not certify Franken the winner because there are outstanding legal issues. A state court might then try to tell him otherwise, as happened in Illinois with Burris's papers, and the Senate might seat Franken anyway. Who knows?

Re: You can't spell v-o-l-a-t-i-l-i-t-y with a "why?".
 

I don't believe there's any dispute about it, and I think everyone agrees that there's potential benefit to relaxing the rule right now. So, as I just said, the hard question is how to weigh these incommensurable costs and benefits. We all have our opinions, which we've hashed and rehashed. I was trying to ask when and how we'll be able to decide who was right, not to try to continue the rehashing, but because I'm genuinely curious as to the answer.

Re: I hate politicians!
 

There is some debate about this.
http://www.startribune.com/politics/...7PQLanchO7DiUr

Minnesota law says "‘an election certificate shall not be issued until a court of proper jurisdiction has finally determined the contest" so nothing's going to happen until after a Minnesota Supreme Court ruling (assuming Coleman will at least appeal that far). The question is what happens if the MN court rules against Coleman and he appeals to the US Supreme court or starts a new federal suit. Pawlenty would be in a tough spot for his own political future. He'd be a whole lot better for the GOP than Sarah Palin but his star lost a little luster when McCain passed him over for her.

Re: I hate politicians!
 

So the short answer is approximately:

Franken's team thinks Pawlenty doesn't have a real way to stop "certification", but Pawlenty and his staff (wisely, for all involved) haven't tipped their hand about how they might try and some observers have non-absurd theories of what their justification might be.

No?

ETA: Or what Fugee said.

Re: I hate politicians!
 

No, but I did think that for better or worse the Supreme Court decided it was over, and that there wasn't really an avenue for appeal from the high court. Unless you're talking about a challenge to the seating of the electors from Florida in the Senate (or House, whoever does it), but that's kind of the end point, no?

I realize there were plenty of cases Gore could have brought in various counties while the other cases were pending, and that was part of the problem the Supreme Court had with the process.

Re: You can't spell v-o-l-a-t-i-l-i-t-y with a "why?".
 

I don't really know if there is an answer to your question though. Lots of things that are happening that will hopefully help, and I think it will be impossible to isolate the effect of any individual thing.

Re: I hate politicians!
 

If the Minnesota Supreme Court rules against Coleman and he appeals that decision to the U.S. Supreme Court, I would read that Minnesota law as not requiring Pawlenty to act yet, since there has been no "final" determination until the last appeal is done. Do people say Pawlenty can't wait for the end of that appeal?

OTOH, Pawlenty would be on thinner ice if Coleman exhausts his appeals and then brings a collateral challenge in federal court. That's what I was trying to say before.

eta: Thinner ice legally, I met, but Fugee's point about the politics of the situation is probably more important in any event.

Re: Yeah, Iowa!
 

Sadly, this probably means yet another disappointing amendment to a state constitution.

Re: I hate politicians!
 

It's the PB board, let's debate every offhanded remark!

Gore would have been stupid to have fought any longer, realized that, and quit. He neither would win nor make any friends.

Coleman ain't going to win either. He's toast. But apparently making friends with Cornyn & Co. justifies putting everyone through this. Pawlenty gets to decide whether he wants in on that action. Maybe it will win him a Texas primary.

Fugee's right to be frustrated. Coleman needs his Al Gore moment (and to be fair, Richard Nixon had such a moment in 1960 as well).

Penske?
 

Re: I hate politicians!
 

People aren't talking so much about an appeal of the MN Supreme court case to the US Supremes. The real question is what happens if he brings a constitutional EP challenge in federal court. Would a federal court issue an injunction, would Pawlenty issue the certificate if it didn't, etc.

Considering that Coleman was perfectly happy to ignore absentee ballots when he was ahead, getting all full of righteous indignation about them now (but of course only the ones from GOP-heavy places) is a bit disingenuous.

Coleman needs to consider his own political future (such as it is). He didn't do a good job of convincing people to vote for him last Nov. and is said to consider another run for governor if Pawlenty doesn't run again. Dragging on the process isn't making him more popular.

I hate them all.

Re: You can't spell v-o-l-a-t-i-l-i-t-y with a "why?".
 

You know, I discussed this issue briefly with a partner who is knee deep in this stuff the other day. He said the problem with MtM accounting for illiquid assets (especially the ones we've been discussing) is that both sides, the buyer and the seller know that there is value in those assets and they both have models that can predict that stream. But the problem is, with MtM, the bank has to list an asset that may, based on both models, be worth $70, but they have to list it on their books as $30. The buyer knows it's worth $70 (based on their model), but the buyer also has to list the asset on its books at $30, so they offer $29. Bank says, "Fuck off." Loosen the rules and offers get closer to $70.

As for your question, I can't tell you how to tell if the change is the right one. If I could, I would probably have Geithner's job. The immediate problem is that the banks are holding assets on their books at really low numbers--I and many others think they are artificially low. We're trying to (i) determine the actual value of those assets and (ii) get those assets away from the banks. With MtM, you can forget moving them and banks must hold more cash to cover them. I don't see the point in that, especially since so much of the crisis right now is based on a lack of credit. How can one tell, in the future (immediate or long-term) whether it was the right decision other than credit loosening? I don't know. The immediate problem is freeing up cash for credit and fixing bank balance sheets. So, I guess my question is, can you tell me how keeping things as they are helps things? And what's the point of marking these assets to a market that doesn't exist? How does that help anything?

Presumably the banks are taking steps away from being insolvent with the accounting change. Presumably cash will be freed up as a result. Presumably, freeing up cash because of this change will allow for more loans to be made. I suppose the downside would be that the banks price this stuff at rates at which no one else wants to buy them and they have truly not valued them correctly. I guess the question then becomes, will the banks be in trouble because they have lent too much cash based on the skewed (upward) valuation? Maybe, if their models are completely wrong. But if they carry these assets on their books, and those assets pay off at or close to what their models say they will, what's the harm if they can't sell them? If shit goes south again and BofA has to sell the assets immediately to be solvent, then we're in trouble, right? But if that's the case, they would have no more luck selling this crap at that point than they do now. So, the market value for those assets will once again be zero. How are we worse off?

No. I said when we were first arguing that the markets would welcome the change in accounting approaches. You said, "I'd like to see that." But what you really meant to say was, "We won't be able to tell how the markets feel about the change, because it's impossible." We should have had the argument back then. Having it now just makes it seem like you're so stuck on your intial argument that you won't budge an inch.

TM

Re: You can't spell v-o-l-a-t-i-l-i-t-y with a "why?".
 

I understand this view, and it may be the right course in extraordinary times. But are you really comfortable with mark to model? How did those models hold up over the last 2 years?

Re: You can't spell v-o-l-a-t-i-l-i-t-y with a "why?".
 

You mean compared to the market?