Here's a month-old butt gasp by Captain Fishsticks that has regrettably not passed out of Spot's memory; Spot already did a post about it here. However, there is one more teensy thing that Sticks said that should not go without comment:
When housing prices fell, homeowners saw their equity decline. As mortgages flipped "upside down" (subprime or otherwise) – properties were worth less than their mortgages. Holders of mortgaged-backed securities, absent a true market, had no means to price their investments. Lacking a market and under the "mark-to-market" accounting rules of the Sarbane Oxley Act [sic](another bit of panic-inspired legislation), those securities are virtually worthless. They have a value, but lacking a market, no one can actually determine what that value is. The result is what we see today – a drying up of liquidity in the credit market.
Now, on any given Sunday - or any other day of the week for that matter - Sticks is a capable of pitching horse apples, but this one is really ripe. Captain Fishsticks - the song sparrow of the free market - is complaining that willing buyers and sellers are not arriving at the "right" price for mortgage-backed securities, actually collateralized debt obligations generally.
Spotty, you're mixing your metaphors again.
Oh, thank you grasshopper; sorry. Where was Spot? Ah, yes.
According to Sticks, the market knows all: knowledge is "embedded" in the market. Now Spot thinks that sometimes knowledge is embedded somewhere else, and this is an example of Sticks' implicit admission of that fact.
Sticks is upset that Sarbanes-Oxley required some transparency in the valuation of assets held by public companies. Nobody on Sticks' side - the Delta Quadrant - complained about marked to market rules when asset values were going up and up. But now, well that's different.
Here is the briefest description of marked to market accounting and why it is important:
The savings and loan mess of the 1980s, which became such a big mess in large part because S&Ls didn't mark their assets and liabilities to market, provided real-world impetus for such a shift. Most S&Ls became insolvent in the early 1980s because of the mismatch between the double-digit interest rates they had to pay to borrow money and the 5% to 6% a year they were earning on the 30-year-fixed mortgages that made up the bulk of their assets. But the accounting standards of the day obscured this grim reality. Some S&Ls--like Washington Mutual--took advantage of the reprieve to trim down, shape up and get themselves out of trouble. [Although Wa Mu is back in the soup again!] Many others became what's known as zombie banks, lurching across the landscape running up ever bigger losses until taxpayers had to put up several hundred billion dollars to shut them down and pay off insured depositors.
Sticks apparently likes the old way better.