Bank bailout commentary: Not so fast!

Haste makes waste. Any time 535 people reach an agreement this quickly, you know most of them did not even read it before signing off. That, sports fans, is how we got into this mess to begin with.

What remains to be seen is whether the measure will pass (probably) and whether the markets will be fooled (possibly). Early signs are not good with the Dow off 300 points, as I write. However, one should never overestimate the intelligence of investors who, after all, bought all of those mortgage-backed securities in the first place.

From a starting point of three pages last week, what appears to be the agreed bank bailout legislation runs to 109 pages of text that will generate millions if not billions in legal fees over the next five or ten years. My preliminary observations are as follows: Continue reading

New bailout draft: devil in the details

The bank bailout “Agreement on Principles” now circulating is, at best, a broad outline. It is easily foreseeable that a final agreement will yet fail over disagreements about detailed implementing language.

For example, the Agreement specifies that the “Treasury Secretary is prohibited from acting in an arbitrary or capricious manner or in any way that is inconsistent with existing law.” This statement is so broad that it could be used to nullify the entire deal since, as we all know, existing law does not allow the Treasury Secretary to do anything that this Agreement purports to allow him to do. Continue reading

IBD wrong on bailout: Bill is too short, gives too much power to Treasury

“The market is waiting. The time to act is now.”  So said Investors Business Daily, yesterday.  In support of their call for Congress to just “sign off now” on Secretary Paulson’s plan to rescue U.S. banks, IBD’s editors point to the proposal’s brevity and “focus” and imagine — how is impossible to say — that it doesn’t give too much power to the Treasury: Continue reading

Lynn Turner: Fair value accounting didn’t cause banking crisis

As fur flies in Washington over technicalities of the government’s proposed bank bailout, ordinary mortals may feel left out of the conversation if for no other reason than the rarified vocabulary of the debate. What, for example, is this thing called “fair value accounting”? Why should anyone but accounting geeks care?

One answer comes courtesy of Lynn Turner, former SEC Chief Accountant, who today circulated a message reproduced below with his permission: Continue reading

Stressed over AIG & Lehman Brothers? Learn before you burn!

“Sue them, jail them, make them pay,” cries Ann Woolner. “I’d fire Chris Cox,” shouts John McCain. Floyd Norris chimes in, “Had the S.E.C. gone over the records of Lehman and Bear Stearns with the vigilance it now promises for the shorts, we might not be in this mess.” Steve Covey: “Seek first to understand.” Whoa! How’d Covey get in there?

Too many pundits and politicos over the past couple of days have rushed to condemn what they simply do not understand. Woolner’s piece offers a nice illustration: Continue reading

D.C. Circuit Court: McCain’s right, the President can “fire” the SEC Chairman

While I disagree with John McCain that Chris Cox should be “fired” over recent market turbulence, the D.C. Circuit Court of Appeal agrees with McCain that the SEC chair can be dismissed by the President of the United States.  An unattributed ABCNews blog is reporting otherwise on the authority of an unnamed source. Continue reading

McCain wrong to call for firing SEC chairman Cox

John McCain has lost his marbles or his principles. The guy who so courageously faced down public criticism of the Iraq War “surge” is now just another member of a pack irresponsibly yammering for some kind of vengeance against someone over the sub-prime mortgage and stock market mess.  Simply pathetic.  Reuters reports: Continue reading

IFRS vs. U.S. GAAP: Porsche controls Volkswagen

Since the SEC’s announcement of a proposed timetable for implementing IFRS in the United States, a variety of commentators have come forward asserting that IFRS would be “bad” for the United States because, among other things, U.S. GAAP supposedly offers “higher quality” financial accounting standards than IFRS and a smoother, more transparent standards-setting process than the IASB. In fact, the opposite is arguably true. Today’s news that Porsche has upped its stake in Volkswagen to 35.14% offers an illustration. Continue reading

Is Sharia law now enforceable in the United States?

Say what?  The TimesOnline reports today that through the mechanism of private arbitration the government of the United Kingdom now enforces Sharia law in civil and family law cases where the parties have previously agreed to be bound by Sharia court rulings.

At this point, readers may be wondering why the headline of this post asks if Sharia is enforceable in the United States.  Answer: U.S. law confers even greater power on arbitral panels than does U.K. law.  If it’s happening there, it either is already here or will be very soon. Continue reading