The bankers have got to love Mark to Fantasy Accounting ... it is so easy to dream up a rationalization for the value of toxic assets that supports the place where the bonus is maximized. (i.e. the real estate {land & building} have much greater underlying value than the market currently recognizes and the "liquidity crisis" has resulted in extreme investment conservatism ... right .... tell that to the trillions of dollars on the sideline)

Talk about a strong lobby group.

For those not familiar with FASB (pre-crisis), the proper treatment of financial assets (i.e. mortgages, bonds, derivatives etc) was they be written down to the value the financial markets independently assign to them. The rationale for this is that since financial assets are claims to money, they are cash and the market would correctly assign a value based upon the probability of payment and the rate of return.

The write offs caused by mark to market accounting would affect the P&L and B/S of the company in that the amount written off would be reflected in a lower level of profitability (less bonuses) and reduce the level of assets owned by the company ... given the fractional reserve system every dollar taken off the B/S meant .90 could not be lent and hence a liquidity crisis occurred. Why, a fundamental loss of confidence in banks caused by these write-off losses(toxic assets).

The real "Here We Go Again?" (collapse of the fundamental economy) will occur since the underlying value of the toxic assets continue to deteriorate i.e. increased foreclosures in the personal (alt arm) and commercial real estate markets. WHY? Business conditions continue to deteriorate, overcapacity, increased unemployment (both caused by uncompetitive wage rates) increasing debt levels despite the lowest sustained interest rates in the USA EVER.

It is very hard to blame the bankers for practicing the same desire to defer addressing the underlying problems. Both individuals and the government have become so accustomed to deferring pain through aviodance and delusion that it is only fair that the bankers also be allowed to do so.

The "harbingers of doom" like myself are so far removed from the process and so incapable of practicing the deception that accompanies political leadership that we are considered extremists in our views. Indeed we are ... extremely honest about the real conditions and extremely condemned as pesimists and alarmists.

Effective politicking could best be described as the ability to persuade someone to do something which without the influence that someone would not otherwise do.

It should be no surprise to anyone that the political system of the USA (and Canada) has been taken over by various lobby groups for the purpose of furthering the agenda of their benefactors. One need only look at the motives to determine if the publics best interest is being served through them.

As the crisis over health care costs and accessibility continues it is fascinating to see how some incredibly strong lobby groups (i.e. the tobacco industry) are now being attacked by government because of a newer and stronger lobby group (health care reform).

Here we go again? in all likelihood this is true, more bonuses, bank defaults, a significant crash in the market followed by rhetoric and propaganda on how this was so unpredictable, all the signs were becoming increasingly positive, don't worry we have the situation under control.

The choice is yours, believe in the government, the political system and all they have done for you or pay close attention to the advice of Jim Sinclair, Jim Rogers, Marc Faber, Peter Shiff, Nouriel Roubini, Nassim Taleb etc etc

I remain stunned at the FASB decision ... that decision violates essentially all principles of accounting and I am ashamed of my profession.

orgy