What’s wrong with this picture?
Too many agree.
The Ten Trillion Dollar Black Swan
By Mike Razar
It is nearly unanimous. The reason for the current financial mess isn’t over-leveraging, or criminally negligent management and Directors, or even an excess supply of millions of homes. It is that darn mark-to-market rule. Just ask Warren Buffet, Donald Trump and other financial geniuses. Even the journalists are on board…Steve Forbes, Ben Stein, Lou Dobbs, and (gasp) Bill O’Reilly. I haven’t heard Cavuto on the subject. He is usually the sharpest, most level-headed one of all, so I’m hoping he’s not on the same train. Politicians galore…no big surprise…anything to find an easy scapegoat.
My usual reaction to that kind of herd mentality is that if they all agree, they must be wrong. Yes, I’m that much of a cynic. But then I see that even Newt agrees. Wow. Maybe this time they are right. And then I start thinking. It is unlikely that a huge mess like this has a single cause. But imagine that we follow their advice. Instead of marking to market, let the firms carry bad paper at face value. Wait just a minute (I hear you cry)! That paper really isn’t so bad. Just because the collateral doesn’t cover the loan amount doesn’t mean the loan will go bad. Well, maybe you’re right. I know how you can prove it. Just buy the stuff at a 10% discount to face value. That should be a good cushion. Put your money where you mouth is or shut up!
Truth, Lies and In Between 