BAILOUT [strike]STRUCK DOWN[/strike] PASSED DOW PLUMMETING!

I already went through the reasons you guys don't want your banks going tits up in this thread but for those for whom two weeks ago is beyond the boundaries of active memory, let's go again.

So the banks won't be getting the bailout they were after. A load of bankers are going to lose their jobs as a result. A significant reduction in the workforce means that fewer people are going to be riding the bus to work, eating lunch, going to the gym, wanting their lawns mowed and so on. As such, the people who work on the buses, in the sandwich shops and gyms and those who mow lawns are all going to lose their jobs. These people are now going to stop buying petrol and computer games and going out to dinner so the people working in petrol stations, computer game shops and restaurants are going to lose their jobs too and so on and so on.

So now you've had a load of job losses, you'd think that'd be the end of the problem right? Nope, because those people are now not paying tax any more. In fact, they're drawing unemployment benefits so they've gone from contributing to the tax purse to being a drain on it. Some lucky ones will have savings to live off, only the banks went bust, so the fed has had to guarantee their savings, that probably won't be cheap. Oh yeah, those banks that went bust, no more tax to pay for them. In the UK, the Bank of Scotland paid £6 Billion in tax last year. Imagine what Lehman's tax bill was, that's now out of the system.

The stock market might not be full on crashing (yet) but the value of a lot of shares has been halved or worse. Any of you got a pension? Not any more you haven't. Pension funds are to a large extent based on share speculation and bank deposits, meaning the value of them has been wiped out. I don't know about the US but over here, companies aren't allowed to have negative equity on their pension schemes so in order to prop them up, they have to save money elsewhere, so say goodbye to a payrise this year. Also, if you don't have a pension scheme, don't be expecting to get one any time soon.

If you work for a Dow listed firm, your job is probably already on the line and the trickle down effect means you'll struggle to find any vacancies elsewhere.

What money the surviving banks do have they're going to hang onto for dear life. So no more lending or selling of debt. This causes stagnation in the economy as no firms can borrow money to invest in research or new premises, especially as nobody has any money to buy anything anyway. Your currency is fucked now so imports are going to cost more which means increased prices on pretty much everything in your shops and more companies going bust as a result.

You could save a fortune by pulling out of Iraq I guess but if you think oil is expensive now, just imagine what it'd cost without the US army stationed round all the drilling platforms.

Essentially, whilst $700 billion sounds like a lot, it's probably not much more than your civic purse is going to lose anyway out of this only without the bail-out it's going to take a shit lot longer for your economy to recover. Sadly, as this thread proves, the American public is for the most part fairly ignorant of the bigger picture and long term ramifications of the recent financial worries and sensationalist headlines about the spending of public money are a powerful thing in an election year. About the only chance your economy really has is if a big Chinese or Arab conglomerate starts buying up your banks. Of course that's never going to happen because, well, Team U.S.A. would rather be dead than red, or in a headscarf right?

You guys are pretty fucked. You're probably going to drag us down with you but our economy is more resiliant than yours, if only because all the big insolvency firms are based in the UK and because we're on better terms with Russia and China than you are.

Jam it back in, in the dark.

If it were me and from a purely economic perspective, I would have bailed out the banks. I wouldn't have given the money away and let them get on with it, I would have specified that the money was strictly to be used to improve liquidity. Get money flowing around the system again, allow lending but jog on all the ridiculous financial instruments people have been coming up with to shuffle debts around.

The economy needs banks with money, firstly to stop the unemployment ripple and secondly to allow other companies to borrow the money they need to expand or in some cases, just stay afloat. Share prices are fucked but that in itself is not a problem, until you cash your shares in. With money available to invest, some bright sparks are going to be able to take advantage of the situation and buy up a bunch of stock, consolidating companies and in the long run, create new companies with (Hopefully) greater efficiency and less risk exposure.

Of course, you'd have to make cutbacks elsewhere, the obvious choice being military expenditure. The less popular choice would be to stop over-subsidising your farmers and open up your borders a bit. Increased imports are bad for GDP and don't help growth in the short term but you'd benefit from better relations with trading partner countries and exports would rise as a result, especially with your currency being so cheap at the moment. Capitalise on this and you'll end up with a stronger currency and a positve net import/export ratio in the long run, strengthening your economy.

The problem is, there are no short-term fixes and people want short-term fixes. What needs to be done is some proper long-term (Read ten years) planning but with two changes of president in that period, you're just not going to get that. The World Bank is never going to let the USA completely collapse so you can actually borrow on your GDP to your heart's content so the $700billion really isn't that much money in the grand scheme of things.

There's nowhere I can't reach.

Originally Posted by Gechmir

Just a tip for those who do trading: Apple dropped 18% today =3 Nice time to buy some up. Ebay dropped 11% if you're looking for something that is cheaper per share.

That's a pretty solid way to lose money right there. The market doesn't magically stop it's fall just because the Dow closed for the evening. There's still a fair bit of falling to come yet, especially for companies like Apple who, as producers of luxury items will be hit hardest in the coming months. The only hope for shares like eBay and Apple going up in price any time soon is if there's a shit load more ignorant people like you playing at share trading who inflate the value through dumb-arse moves like that. Given the capitalisation of both companies it'd have to be a fucking shit load of idiots with a lot of money to burn to manage that.

The people making money yesterday and today are the hedge fund short sellers. I imagine yesterday's crash created a few billionaires here and there, assuming they could find anyone dumb enough to lend them their stock holdings. If I had money to invest, I would seriously be taking it otu of the American economy and investing in the middle east or China. Both those regions have massive cash reserves, massive resource stockpiles and good credit with the World Bank. The only thing stopping a wholesale takeover of the American financial system by foreign interests is your protectionist trading policies. To be honest, a massive injection of Arab money would seriously sort your economy out and as an added bonus, be hilariously ironic for those of us watching from abroad.

This thing is sticky, and I don't like it. I don't appreciate it.

Originally Posted by Zergrinch

No, I think this fall is actually driven by fear - so the valuations here are not entirely rational, and there may be undervalued companies by now.

Sure, Gech won't be buying at the bottom. But you can bet your booties it's nowhere near the top. Sure, there'll be a lot of see-sawing before we get out of this mess, but any intrepid investor who bucks his fear and goes for a value play will be richly rewarded in the long term.

Let's restart the Investopedia contest, chaps. We'll see who picks the most undervalued company!

Sure, you could buy now and play the long game but in terms of risk and reward, that's retarded. Companies aren't undervalued now, the slump yesterday was a long overdue correction. With no confidence left in the market, companies share prices will start reflecting their book value, rather than carrying a value based on their future potential. Take eBay for example, they have very little in the way of physical assets, the value placed on the company is largely based on future advertising revenue streams. In a time of economic slowdown, advertisers won't be willing to pay as much and people will be buying less, therefore eBay's actual value will drop right down.

The collapse of the market was not triggered by the fear impulse of small investors. Small, private investors make up a tiny fraction of the daily trading and have a negligable effect on share prices. The reason everything crashed was that the big investors; banks, pension schemes, hedge funds and the like wanted to minimise their short term losses so sold up all their American stock and are now probably holding cash for the time being. That cash is tucked away safely in Swiss and Cayman Islands bank accounts for now until they decide that investing in stock is a good idea again, with no guarantee that that's going to happen in America.

That's why this is a global issue, not just an American one. Anerican companies invest all over the world and when they start suffering, they sell up their holdings to generate some cash. This prompts a similar sell off by other investors in whichever markets are taking a kicking as a result.

The cash is still there, it doesn't just disappear. Only rather than being in American banks, it's sat in an account abroad, earning interest at a higher rate of return than you'll get from investing in stock right now.

You could buy shares in Apple or what have you and yes, eventually they'll probably end up worth more than they are now but that could be years from now and in the mean time, you could have put the money in a bank account or governement bonds and earned 6% interest or more on the investment. In real terms, with inflation running rampant that's still not much but it's far, far more sensible than blindly buying up shares in the hope that one day they might make you some money.

Don't ever be so arrogant as to think you can beat the market, these people earn a lot of money to do what they do for a reason.

I am a dolphin, do you want me on your body?

Originally Posted by Zephyrin

I, for one, want this crisis to stay in the market. I DO NOT want to see the ripple effects. I didn't see this kinda hubbub from you guys over the stimulus package, which was aimed at low class citizens, and as we can now recall, didn't help a motherfucking thing. But it did cost 150 billion or more.

It's okay for me and you to borrow from credit cards, in case we can't pay the bills. That's what they're there for, and they make money from it.
Now big brother needs a loan from big daddy, and big daddy is likely to prosper from it as well. At any rate, prosper in comparison to what would happen if he didn't help out.

I am outraged, a bit, though, at how the House republicans blamed Nancy Pelowsi for keeping the bill from passing because she gave a "demoralizing speech". Grow a backbone, you conservative prudes.

I have a few questions on the matter.

Has anybody figured out if we're just going to print the money we're loaning (decreasing the value of our dollar), or borrow it all from China?

And Shin, could you explain that borrowing on GDP from the World Bank for me?

When a country's government wants to spend more money than it's getting in it basically has four options. Go to their equivalent of the federal reserve and withdraw it, print more money, borrow it from another country or borrow it from the World Bank.

Printing money is not a viable option as the resulting inflation would completely fuck your economy, far beyond what you're seeing now. Printing more money serves to devalue the money already in circulation. By printing new notes to cover the defecit, you're not really filling the hole, you're spreading it around everyone and by giving $700billion of new money to the banks, you're just making everyone else's money worth less. In it's mildest form, this leads to rising prices, in it's worst form you have the situation you have in Zimbabwe or Weimar Germany where you need a wheelbarrow full of bank notes to buy a loaf of bread.

You could borrow the money from another country but most if not all of America's main allies are in similarly dire financial straits and the amount of money you're after is about the same as the GDP of Denmark so you'll struggle to find someone to lend you that much.

The World Bank exists primarily to aid developing countries. Pretty much all the developed nations pay into it annually and the World Bank loans the money to developing countries to help fund, well, development. Whilst the primary function of the World Bank is to support developing countries, I'm fairly sure that lending money to an industrial nation is not without precedent. World Bank loans however are tightly structured and deviating from their terms incurs pretty harsh interest penalties. It would make more sense for the US to stop paying in for a bit but to do so would be to default on all sorts of international treaties which you really can't afford to be doing right now.

The final option is converting gold stock and similar at the federal reserve into cash by selling it. I'm not sure how much the US keeps in mineral reserves but I do know that trying to dump $700billion worth on the market at once will wipe out the price of whatever it is you're dumping, meaning the cost will ultimately be a lot higher than $700billion.

To say the money is coming out of taxpayers pockets is a bit of a misnomer. What's more likely is that some would come from reserves sales, some would come in international loans (Possibly by writing off some of the reparations debts that Germany still owes you for example), some would come in the form of a short term loan from the World Bank and some would be raised by borrowing from banks around the world, using future tax revenues as collateral. It's only this last slice that taxpayers are directly funding but without being privy to the inner workings of your government, I couldn't say how big a slice of the total that was.

$700billion is a lot to raise, even in theoretical money, but the inevitable repayments would, I believe, be easier to bear than the impending fucking over you're about to get by not bailing out the banks. Whilst people grumble about higher taxes, they're less psychologically damaging than mass redundancies and higher prices in the shops. You only notice higher taxes once a month when you get paid, you notice higher prices every time you buy something.

I was speaking idiomatically.

Oh yeah, issuing bonds, I always forget about that.

Still, like you say, someone has to buy them and that's as likely to be foreign investors as domestic ones, leading to a reduced balance of payments in the future. Eventually that will swing round to be a benefit as a cheaper dollar means more exports but in the short term, imports will cost a load more, including, crucially, oil.

What kind of toxic man-thing is happening now?

Just because nobody mentioned this yet, hardly qualifies it for a new thread. Let's try to keep discussion on one topic in one thread yeah?

Additional Spam:

Originally Posted by Zergrinch

Americans would start using less oil.

Hahahahahaha, yeah right. America fucking loves oil, more than anything else. The main reason for not signing up to Kyoto and paying scientists to say that global warming is a myth is so they can keep burning the stuff and bollocks to the eastern seaboard in hurricane season. Petrol prices rise in America and everyone here starts complaining about how it now costs almost a fiver to fill up their eight litre SUV. The concept of not using oil is an entirely alien one to the US. They're spending billions of dollars a week keeping their army in Iraq just to secure oil reserves. Shit, they could have saved most of the money they need for the bailout by not even flying the troops over, let alone the cost of keeping them there for the best part of a decade. The ludicrous amount of money the US government has spent in maintaining their access to Iraqi and Kuwait oil is a big part of the reason why the US government is almost bankrupt in the first place.

No, oil prices will rise and America will keep using the same amount of oil. Rather than occasionally turning things off when they aren't using them and walking places once in a while, they'll be faced with a higher and higher proportion of their income going on oil based products, fuel, power, anything made outside the US. They won't be able to get loans because their banks aren't offering, pay rates will fall behind inflation making it even harder to maintain the standards of living most of them seem to believe is a right rather than a priviledge. People will start eating cheaper food to save money which is generally worse for you meaning the obesity epidemic will get even worse putting greater strain on hospitals. More people will turn to drink and drugs to combat the depression of having no money and theft and burglary will increase as consumer good s become harder to come by. People will give less to charity and the fear of crime will make the already overly-paranoid American people even more fearful of their neighbours. Gun crime will increase, as will the number of accidental shootings as everyone tools up to defend their remaining material possesions.

I don't think a lot of people in America realise just how important the strength of the dollar is to their standard of living. Between that and having a government with no money, America is unlikely to be a very nice place to live for the next few years and personally I don't see a quick-fix solution, I think you'll just have to ride it out and wait for international markets to do their thing. In the mean time, the best the US government can manage is to try to reduce the dependance on imports, make the country more self-sufficient but not just by imposing trade tarrifs as that keeps prices of domestic goods artificially high, making life even harder for the population. Instead they need to focus on developing alternative energy sources, improving efficiency in food production and reducing food miles and supporting those industries where America is a world leader, not that I can particularly think of any off the top of my head. The financial markets will eventually settle down, albeit much quicker if they get given the money they need to start functioning again.

FELIPE NO

Originally Posted by The_Melomane

So, how about that bill actually passing? You know, like it did.

I don't know much about this bill other than that it gives tax breaks to companies and raises the FDIC insurance rate. I was under the impression that in a "free market" economy that good old invisible hand is supposed to in and fix everything not the government. I guess that's why a bunch of people are calling it a socialist bill? But that doesn't make sense if it LOWERS taxes for companies. (I'm probably not making any sense, probably because from what I know of this bill, it doesn't seem to make any sense.)

Wouldn't it make more sense, instead of reducing taxes on the companies, to invest in America's crumbling infrastructure?

Reducing taxes is a very free-market thing to do. Essentially by doing that the government are handing the power to kick start the market back to the corporations.

By reducing taxes, the companies have more ready cash available. The idea is they can use this cash to invest in new projects whereas before they'd have to borrow money from the banks to fund that kind of thing, something they can't do so easily now.

Increasing the insurance cover means confidence is increased that people's life savings won't be wiped out by a bank going under which stops people wanting to withdraw all their money and hold it in cash, which is what fucks banks over as they often struggle to scrape together the ready cash to service everyone's withdrawl needs.

If the government started investing in infrastructure, that would be a very socialist, even communist thing to do. This stance assumes that the government know how to fix the economy better than businessmen do, which may or may not be true but in a country built on a mantra of free trade (Except with foreign countries of course), that kind of interventionist policy is never going to be taken on board.

Tax reductions are a slow way to recover an economy and can backfire if all the companies do is use the tax breaks to pay higher dividends, which I would suggest is a distinct possiblity as the boards are going to want to keep the investors sweet to stop them selling their stock and devaluing the company.

What, you don't want my bikini-clad body?

Originally Posted by Bradylama

No it isn't.

Melomane is referring to things like roads, highways, bridges, rail lines, etc., which has been a popular practice since the Romans. Not that public works would help the economy in the short term anyways.

A properly capitalist government wouldn't build any roads. They'd sit back and wait until the demand for a new road was such that people were willing to pay someone to build one (And then put up a toll booth on it). Public works building is strictly for reds.

Jam it back in, in the dark.

Originally Posted by Bradylama

A properly capitalist government would be determined by market forces, but no government to date has ever behaved that way.

Framing individual policies in absolutist terms of capitalist - Marxist or capitalist - socialist is for the birds.

I know this, I was just saying how I wasn't technically wrong before...

There's nowhere I can't reach.

Originally Posted by Watts

No government bailout of any asset bubble has ever worked. It doesn't matter whether we're talking about railroads (a la the Long Depression), tulips, or housing.

Actually, the reason you even have a housing bubble is because of the moves your government made to soften the blow after the dotcom bubble burst. Sure, in the long run everything has the potential to go to shit much worse than would have happened in the first place but saying that one cannot bail out an economy after a bubble bursts is just plain wrong.

Quote:

The other reason is because nobody is enforcing trust laws, much less accounting laws, and/or any other laws that govern finance. As sick as it might sound this is probably a good thing. If our financial institutions were forced to reveal just how insolvent they were mass chaos and panic would ensue.

Hi there.

You don't know much about accountancy do you? "Accounting" laws are some of the most strictly enforced that there are. If a company ignores them, they'll never get an audit signed off and will never persuade anyone to invest in them. They'll also get a massive fine.

There are actually very few proscriptive "Accounting" laws as you put it. Here in the UK we have the soon to be superseded Companies Act 1985, sections of which deal with the annual reporting requirements for companies. The actual statutory requirements are very few, I could produce a set of Companies Act compliant accounts for a small company on the back of a cigarette packet, literally.

What protects investors and makes accounts of any use at all is not the laws in place, it's the accounting standards and Generally Accepted Accounting Practice. In the UK we have Financial Reporting Standards. The book is massive and very detailed and revisions are made on a constant, rolling basis. Work is presently afoot to codify the various accounting standards from around the world into the International Financial Reporting Standards (IFRS), led primarily by the leading UK accountants' institutions (If there's one thing us Brits are good at, it's accountancy).

The main barrier to amalgamating European and American standards is the US's use of fair-value accounting, rather than asset value accounting. Over here, if you buy a machine, it goes in your accounts at the price you paid for it, which is depreciated over the life of the machine. In the US, the value of the machine is not what you paid for it, rather it's based on the revenue you expect to derive from the machine over it's lifespan.

In terms of machinery, that's not a problem and despite the obvious problems with what's often a highly subjective and speculative method of valuation, fair value is a reasonable, if overly complicated wy to value things.

The problems start however when you come to prepare accounts for financial institutions. When the American banks gave away all that money in the form of sub-prime mortgages, the loans were not valued in terms of how much was loaned out, they were valued at how much the banks would eventually get back. All these financial institutions had their balance sheets propped up by theoretical future revenue streams from dodgy loans they were never going to get back, but this was entirely in line with standard US accounting practices. To the casual observer, the banks were hugely solvent and all was fine. It was only once the loans started getting written off that it became apparent just how badly propped up they were and many quickly found themselves on the borderline of insolvency.

It's not like anyone was misleading the public, the information was always there. It's just that most people haven't got a clue how to read a set of accounts properly, or in fact have any desire whatsoever to do so. Industry comemtators have been saying for years that the system was on incredibly shakey ground and would collapse at the first hint of trouble but for whatever reason, nobody listened to them.

It's all actually turned out ok for the British banking system. Northern Rock collapsing last year was enough of a shock for them to start covering themselves and stop overstrtetching their assets. The Northern Rock itself was a relatively small bank and the only real losers were middle class people who'd bought a second home to rent out, borrowing beyond their means to do so and frankly, fuck 'em, they shouldn't have borrowed more than they could afford to repay. The US banks on the other hand thought they could ride out the whole sub-prime thing but US accounting practices left their balance sheets extra-exposed to effects with brutally insufficient actual physical capital.

Short version for retards: Banks "suddenly revealing the extent of their insolvency" would have no fucking effect whatsoever because a) The majority of people haven't got the first fucking clue about financial reporting and are simply running around in a panic because the tv has told them too and b) The information is already public knowledge and has been for years with no discernable effect.

Seriously, people are banging on about sub-prime mortgages and credit crunches and shit left, right and centre but how many people actually know what the problem is, how it was caused and the reasoning behind the attempts to fix it? Fuck all, that's how many. It's all just misguided sensationalist bullshit. Yes, the American economy is in trouble, people are going to lose thier jobs and their standards of living are going to have to fall but the world isn't going to end, it's just the business cycle catching up. Economies go up and economies go down, roughly every five years in fact. Recent governments have been trying to iron out the down bits and create a state of permanent growth, mainly to keep getting re-elected, and with no consideration of long-term repercussions. The economy has overheated and is now self-correcting. John Maynard-Keynes is sitting on his cloud with a big "I told you so" smirk all over his face and the masses are getting their buttons pushed by an increasingly manipulative and sensationalist media and thinking that this is all surprising and new whereas anyone with a passing interest in finance, accoutnancy and global economics (Which granted isn't many people) has seen this (Or something similar) coming for fucking ages.

At the end of the day, there's absolutely nothing you, as the general populace can do about it. Nothing at all, except try to make yourself indispensable at work and hope that your company doesn't count any banks amongst it's customers.

This thing is sticky, and I don't like it. I don't appreciate it.

That was a combination of paraphrasing and a bit of assumption on my part Zerg. Fixed assets weren't the best example to use really as their treatment is quite different from long-term loan agreements but since those are hideously complicated to account for, I was using that more as a way to explain the differences between US and UK GAAP and in the process got my explanation arse over tit. Trying to explain accounting systems at the same time as actually preparing a set of accounts is, in retrospect, a silly thing to try and do!

Your explanation is far more clear (And frankly correct) than mine.

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Originally Posted by Watts

Which is why the British Banking System doesn't need a bailout does it? Oh yeah... yeah sure.

I never said that. I know full well that the government is bailing out the banks but I was suggesting that our banking system has a long-term future and is simply in need of a quick cash injection to get rolling again.

The primary reason for our bank bailout, unlike the US's one, is not to stop banks going bankrupt but to stop them foreclosing on debts and repossesing people's houses. Whilst our property market has slowed to almost a standstill, houses here are still worth a shit load and if the banks really, really needed money, they'd bump up interest rates and start repossesing some houses. At the moment, with the government about as unpopular as a British government ever has been, they can't let that happen so are encouraging the Bank of England to bail out the banks. The Tories won't stop them because, as the next likely party of government they're going to have to deal with all the fallout from the current situation so they're looking to mitigate the damage. The Bank of England meanwhile, ignoring the pressure from the Government, are aware that the economy is on the brink of a recession and the importance of confidence in the housing market to keep consumer spending up and stop the economy from grinding to a halt. Obviously they don't want silly arse inflation but as house prices have stopped now and for the time being at least oil prices have slowed down (A situation helped by the kicking the dollar is taking at the moment), they can afford to stimulate a bit of growth by restoring faith in the banks . It's not an emergency measure, it's a faith restoring one and completely different from the bailout America has gone through.

How ya doing, buddy?

Originally Posted by Watts

Value is the amount somebody will pay. Which just brings us around full circle to what I said originally.

Only it isn't. Value is the value in use of the asset. In the case of the car you would look at alternative costs of transport, for example the cost over the expected life of the car of riding the bus instead. Likewise, on a very simplistic level, whilst banks can't sell on these debts at present, this doesn't mean they have zero value. Not every single mortgage is going to default and the value is the future revenue streams in the form of interest, plus the value of the property securing the loan in the first place which might not be as much as it was this time last year but still isn't zero.

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But you're just plain wrong. IF you owned a bit of land and you couldn't find anyone to buy it and someone came along and said to you that as you couldn't find a buyer you might as well just give it to them, you wouldn't, simple as that. The only reason you would would be if holding the land was costing you something and you needed the cashflow.

Even talking on a strictly theoretical level, nothing ever has zero value because future potential value is always a consideration. Nothing is ever enacted on a straight supply and demand current value basis, that's elementary school economics. The reality is that future potential earnings on one side and the opportunity cost of selling or holding the asset on the other side always feature in these transactions. The very concept of there being no buyers so the asset has no value is ridiculous because anything that's free, by the very nature of trying to divide by zero has, mathematically infinite demand.

Your understanding of real world economics is very limited. I think you might want to try learning something beyond the grade school level before you start shooting your mouth off again.

FELIPE NO

And the point remains that who the fuck do you think was being mislead by company accounts anyway? How many normal savers or small investors ever looked at a set of financial statements prepared by their banks? I'll bet that 95% of the shareholders would have received the accounts, looked at the baseline profit figure, looked at the directors remuneration figure and then binned them. That's what makes auditing such a joke these days. The whole point is to protect shareholders and give them the information they need to make an informed decision whether to invest or not but the vast majority of small stakeholder, the most vulnerable ones, haven't got a fucking clue what they're looking at. I personally can deduce a fair bit from looking at a company's accounts but then I've been a professional accountant for eight years and even then, there's a lot of speculation and informed guesswork involved in any summary you do of a company based off the accounts.

To say that not following accounting guidelines is in any way to blame for this is mis-informed, naive and basically just plain wrong. The information has been there all along, in plain sight and available for anyone to view it. The problem is that nobody cared enough to do anything about it and other people were lulled into a state of happy ignorance that financial institutions were somehow exempt from usual economic forces and magically incapable of making dumb decisions.

What, you don't want my bikini-clad body?

Originally Posted by Watts

Nothing works the way it's suppose to in a recession. Throwing out the rulebook is not going to restore trust or confidence. There can be no trust as long as the mark-to-market accounting rules are suspended. Only a reason for the creation of more mistrust. Nobody knows what the financial outfit's balance sheets are worth and there's no way to know.

With regards to the current situation, the relevant balance sheets won't be in the public domain for a good year yet, meaning that any suspension of accounting standards, even if it did happen wouldn't have any immediate effect whatsoever. Most financial institutions are going to have either December or April year ends so you won't see any accounts covering the current period until next June at the absolute earliest.

Also, nobody is suspending any accounting standards anyway. The IASB is looking at how one accounts for financial instruments on a fair value basis when the arse falls out of the markets but any changes will be made slowly and surely and follow a lengthy consultation process. Accouting standards aren't just dropped or ignored on the spot, that simply doesn't happen.

Jam it back in, in the dark.