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October 08, 2008


Kevin Brown

The banks and other financial institutions got into this mess because they thought the boom would never end and that FAS 159 was a way to generate profits that went uncaptured by the financial institutions. However, just as 159 was implemented on an early basis the boom hit a wall and collapsed. Then of course what 159 gave, then 159 began to take away. This is the price of taking the fair value option and being required to reveal more info on fair value using the techniques proposed by 157 to determine fair value.

As for the solution to this problem, these financial institutions need to deal with reality and ride out the storm as best they can. There are no easy fixes and looking and proposing easy solutions is no solution at all.


I oppose so-called "fair value" because it isn't based an actual transaction. Unless I actually secure a buyer and a payment, its a fiction.

I oppose people in Congress generally and their involvement in matters such as determining the proper amount of water that should be used by toilets or the accounting principles that should be used in business.

Reviewing the signatories to that letter reveals a curious amalgam of those that have aptly demonstrated total ignorance on economic matters and those who have demonstrated enough economic reasoning to have known better than to affix their signature.

Of course this is nothing new. I suggest people read "Enterprise Denied" (forgot the subtitle) by Albro Martin, which chronicles the impassioned speeaches of legislators decrying the evils of "surplus", which we know refer to as "retained earnings".

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