Moon of Alabama Brecht quote
April 02, 2009

Carte Blanche For Lying

Years ago accounting rules were amended to demand that banks and other financial institutions account for the real value of their 'assets' by marking them to market prices. That was a good move as investors in banks and other companies could have a more bit trust that their balance sheets showed some approximation to the real value of these.

Now, after heavy lobbying (with TARP money) by financial institutions Congress pressed the Financial Standard Accounting Board to change the rules:

The changes to so-called mark-to-market accounting allow companies to use “significant” judgment when gauging the price of some investments on their books, including mortgage-backed securities.

So from now on all banks etc will again lie about the real value of their assets. The management will show 'significant judgment' to boost the profit and loss statements and to increase its bonuses. The books will again show inflated values and all numbers derived from that will essentially be fake.

The Bloomberg writer obviously did not get that:

Analysts say the measure may reduce banks’ writedowns and boost their first-quarter net income by 20 percent or more.

The 'net income' of the liars will not 'boost'. What will boost are the income numbers they will present to to the public. The real net income will no longer be shown on the profit and loss statements.

This rule change pumped up financial stocks today. With the fake numbers that are now again allowed some idiots can obviously be convinced to buy into these companies again.Rest assured - those stock prices will come down again.

What this move really achieves is a prolonging of the World Depression II we are in. A return of trust is essential to get back to some functioning financial markets and a sane banking system. Hiding insolvency behind marked-to-fantasy 'assets' will not further that.

The powers that be today handed out a carte blanche for lying. We all will have to pay for it.

Posted by b on April 2, 2009 at 02:47 PM | Permalink

Comments

America's financial institutions get to lie, smile, and lie some more.

That's not a bug in the system, it's a feature that has the emphatic backing of our government.

Over in London, at the G-20 Summit, the Anglo-Saxon bankers of Britain and America got their way entirely, as far as refusing any global regulation.

Both Gordon Brown and Barack Obama flatly refused calls by the French, Germans, and other European leaders for international regulations -- and regulators -- that could reach into all nations to hold financial firms to common global standards.

Obama called international regulations a breach of national sovereignty. So, whether at home or abroad, America will not participate in honest accounting standards, nor in honest trade.

America is special.

Posted by: Antifa | Apr 2, 2009 3:28:50 PM | 1

America is not even America it is the United States of America. To call itself America is the first step of exceptionalism.

Posted by: jlcg | Apr 2, 2009 4:37:13 PM | 2

Ok, now what about the "credit event" about to happen re: auto bankruptcies. Were any CDSs written on their debt?

Posted by: vachon | Apr 2, 2009 5:34:16 PM | 3

Of course this FASB regulation will make our corporate balance sheets even more meaningless.

So much for transparency...

Posted by: Obelix | Apr 2, 2009 5:54:19 PM | 4

I find it extraordinarily hypocritical of Obama in that he wants all of the G-20ers to come together to find a global solution to our financial woes, but at the same time, he doesn't want the financials to be regulated on a global scale, because this would violate national sovereignty. Sorry O-Man, but not even you can have your cake and eat it too. Then again, he may indeed be on a mission to globalize losses and Americanize profits.

Posted by: Cynthia | Apr 2, 2009 6:31:08 PM | 5

b) I wish you had 'followed the money' back to your earlier post about the banks putting up $7 worth of inflated assets and the public putting up $7 worth of real assets, all backed by the 'full faith and unlimited deficit peonage of the USA'.

It will all come crashing down. Americans are sheeple, trapped inside their pension funds management and their Do Not Open Until Christmas 401k's, but international capital isnt' waiting around for the Obama Express, they'll liquidating their US$s.

In that sense, then, especially if you've watched the insane antics of Republican
Senators commenting on the bailout their bank-broker deregulation and massive debt creation ... created, maybe revised accounting rules are just moving the cheese.

Kind of like the realization on the Titanic there was only one seat for two souls.
What we used to call, "Reality Check" in the aviation business, that stall alarm.
http://mx.truveo.com/Animation-of-Alaska-Airlines-Flight-261-Plane/id/288230396912433025

Posted by: Glass Steagall | Apr 2, 2009 8:45:20 PM | 6

Vachon.....There is supposed to be over 1 Trillion in CDSs written on GM.I haven't seen figures for the other two.

Posted by: Pitchforks,Torches&Pikes Wold | Apr 2, 2009 8:47:54 PM | 7

Willem Buiter: How the FASB aids and abets obfuscation by wonky zombie banks

The FASB blinked and wimped under, as it had before. It made proposals less than a week after the House Financial Services Committee hearings. With some minor revisions, these proposals have now hardened into final guidance, despite protests from investor advocates and accounting-industry representatives, who argue that rigorously enforced mark-to-market rules force firms to reveal their least inaccurate picture of their true financial health.
...
This is vague and broad enough to drive a coach and horses through fair-value accounting for most imperfectly liquid assets.

Leaving the valuation of illiquid securities to managerial discretion will lead to systematic and systemic overvaluation. Banks with significant amounts of toxic assets and plain bad assets on their balance sheet have lied, lie and continue to lie about what they have on their balance sheets. This has now been made easier.
...
The G20 have made many pious statements about the need to recognise the losses that have been incurred, on and off the balance sheets of banks and shadow banks, and to ensure that the dead hand of the overhang of past losses does not act as a tax on and deterrent to new lending and borrowing by banks. Yet the primus inter pares in the G20, the USA, decides to give its banks another large figleaf behind which to hide their losses and gamble for resurrection. This continues and prolongues the zombification of most Wall Street banks.

The FASB, like the rest of the American regulatory and standards-setting establishment, appears to have been captured lock stock and barrel by the vested interests of the large Wall Street zombie banks (management, shareholders and unsecured creditors).

Posted by: b | Apr 2, 2009 11:28:46 PM | 8

PT&P...Thank you. Scary, huh?

Posted by: vachon | Apr 3, 2009 12:05:11 AM | 9


(via proxy)

On one hand the US is signing the G20 declaration, which contains a major pledge to better regulation and financial transparency. And on the other they are starting "mark to fantasy" accounting. Where would this contradiction lead to? Does'nt this make the G20 declaration just a phoney cover up?

Posted by: a | Apr 3, 2009 12:38:41 AM | 10

[from Encyclopedia of Extinct Cultures, 2025 Edition]

Murikan Tribe

"Before the arrival of the Vampire Capitalists the Murikans (or Americans,
the twentieth-century spelling revived by surviving members in the 2020s)
located their homes along shady streets, freshwater streams and tidal bays
in the irrigated and temperate regions of what is now the Duchy of Neo Con.
This rich economic system provided them with both food, shelter and a wide
variety of clothing, transportation and entertainment. Although the archeo-
logical record provides little evidence of horticulture, Murikans probably
cultivated trim lawns, hedges and flower beds, for their aesthetic appeal.

Murikan artisans made music from handcrafted instruments, which they used
for pleasure and tribute payments to the RIAA tribe of F St, Washington DC.
Electronic music, made from the amplified strings of rock and roll guitars,
were in great demand, particularly among the inland clans. After Murikans
obtained internet beads from the Vampire Capitalists, they began to record
music in the ether and weave that ether into spaces and tubes, which was
mainly used as free content for the Vampire advertising business.

Following the Vampire Capitalist destruction of the Murikan retirement
system in New York in the late 1990s (referred to as the 'Dot.Con'), Chief
Clinton, a Murikan sachem, negotiated an alliance with the predators and
encouraged the Vampires to establish bank-brokerages all across A'Murika,
when he signed the Glass-Steagall Act of 1999, in return for $100,000 and
free sex with an attractive Vampire slave. By 2000, however, the vampires
has taken possession of the Murikan's lands, leaving the tribes with only
rental rights to deliberately over-indebted stick-frame tenements.

The Murikan community adapted to the forces of change. Murikans served in
the local Vampire economy as grocers, retail stores, feed lots, unskilled
laborers, soldiers, sailors and as domestic servants and pleasure girls.
As the number of Murikans declined, many Murikans married ethnic minorities
who were not considered Murikans, except by the census and tax collectors.

During the late 2000's 'Credit.con' era, Vampire real-estate developers
pressured Muricans to sell their property rights for reverse mortgages,
and move to nearby settlement camps and tenement housing. In 2009, the
Murikans under the leadership of Chief Obama, a direct descendant of the
Land of Slaves, began a heated battle with the developers, real-estate
speculators and bank-brokers to regain title to their lands. Vampires
argued that the Murikans were no longer "free citizens", because they
intermarried with ethnic minorities and had adopted a Vampire lifestyle.

The judges agreed with the Neo Cons and announced at the Supreme Court
before all Muricans that their tribe was now 'extinct'. The Muricans
appealed the decision and fought an unsuccessful eight-year battle for
their lands, before Chief Obama was defeated, and all the former lands
of A'Murica became the proper title of the Vampire Duchy of Neo Con, at
the Summit of G20, in 2017. Murican tribes had become landless peons."

An' I ain't lyin'....

Posted by: Mon Talk | Apr 3, 2009 12:58:14 AM | 11

http://tinyurl.com/cm64qr

Very sobering parody, Mon Talk

http://i42.tinypic.com/fw87i9.jpg

Posted by: La Trek | Apr 3, 2009 3:14:10 AM | 12

Mon Talk-

Truth is stranger than fiction...

Is your tale a strange truth? Or a truthful fiction?

It's becoming harder and harder for me to tell one from the other.

Posted by: DavidS | Apr 3, 2009 7:21:32 AM | 13

Mon Talk, no dice. Obama is as much a pawn to the Plutocracy as Bush and the NeoCons are. Obama defeated? Are you joking? He's one of them.

Posted by: Obamageddon | Apr 3, 2009 8:51:01 AM | 14

I came across the following at Yves Smith's blog, a guest posting written by Tyler Durden

http://www.nakedcapitalism.com/2009/04/guest-post-fhlb-chairman-disgusted-with.html

"When the man in charge of the second largest borrower in the U.S. is willing to lose his job due to his discomfort with the FASB's shift in accounting rules, you can bet that the tragic fallout of all the 'market buoying' recent events is only a matter of time.

Somehow this noteworthy event, which happened over a week ago, passed substantially unnoticed until Zero Hedge friend Jonathan Weil at Bloomberg dug it up. Charles Bowsher, who was most recently Chairman of the Federal Home Loan Bank System's Office of Finance and previously served as U.S. comptroller general may be the only truly honorable man in the socialist nexus of politics and finance. The reason for his departure from this critical post - his discomfort in vouching for the banks' combined financial statements. And as Weil puts it succinctly: 'Now the question for taxpayers is this: If Charles Bowsher can’t get comfortable with these banks’ financial statements, why should anybody else be?' Why indeed."

Posted by: mistah charley, ph.d. | Apr 3, 2009 1:02:01 PM | 15

In the 18th Brumaire Marx noted the phenomena of state autonomy from the capitalist classes. Since then many authors have expounded on that from Nicos Poulontzas, to Miliband to Nora Hamilton to Theda Skocpol, etc...

Simply put, the state autonomy thesis suggests that while the state does serve the interests of the long term interests of the capitalist class it does it autonomously from their short term interests. Applied to the Great Depression, the American state saved the capitalists precisely because it expanded into the economic realm. The American welfare state quieted the working class and reduced the contradictions of capitalism (through Keynesianism), in order to make capitalism survive for the long term. So while the state sacrificed some of the short term interests of the capitalists, in the long run it lead to the survival of the capitalist system of production.

What b has presented lately does suggest that the American state is now totaly captured by finance capital. The Geithner plan and the mark-to-fantasy do suggest that the Aemrican state is no longer autonomous from finance capital. The way finance capital is treated vs. the way manufacturing capital is mis-treated also suggests lack of state autonomy. The American state is no longer capable of acting against the short term interests of capitalists and in the long term interest of capitalism. Had that been the case, then the American state would have already nationalized the "zombie" banks, eliminated the shareholders, dumped the toxic assets, and re-privatized the banks. This is in the long term interest of capitalism as a whole. Alas, the American state is acting in the short term interest of the finance capital that control it. This is destructive to capitalism and undermines the survival of the system as a whole.

Posted by: ndahi | Apr 3, 2009 1:30:12 PM | 16

I think this notion of state "capture" is somewhat misleading because it insinuates a kind of instrumental reason and agency the capitalist class doesn't always possess. Rather, the structure of capital accumulation requires a formation of the state to maintain some kind of stability in ongoing crisis of contradictions inherent in the business cycle. What we consider broadly as "capture" is really an unavoidable response to inevitable crisis.

It's the old agency v. structure problem. A devotion to the belief in "capture" as an all-purpose explanation is the position fetishizes agency.

Posted by: slothrop | Apr 3, 2009 4:50:19 PM | 17

I fully understand the relationship between capitalism (base) and state (superstructure). I also acknowledge that in Marxist analysis change in the superstructure should be related to change in the base. But the superstructure (the state) can and does influence the capitalist accumulation process. The state can and does act against the short term interest of the capitalist class, ie, maximum profit in order to keep the process of accumulation going and the system legitimate. That is what is meant with RELATIVE state autonomy. The state is autonomous from short term interests of the capitalists (maximizing their profits) in order to continue the process of capitalist accumulation w/o massive cataclysmic disruptions. If you only believe that the capitalist process of accumulation shapes state reaction, then you are dealing with the sort of vulgar marxist analysis that was commonly practiced during Stalinist times. I do not subscribe to that sort of analysis and neither did Marx as evidenced by his work in the 18th Brumaire. Go read it and you will see what I mean.

The American state has lost its ability to act autonomously from the short term interest of finance capital. Finance capital's most pressing interest right now is to unload their toxic assets at a profit. They are interested in maximizing the return on their profits and they will suck the state/taxpayer dry to do so. Whereas the long term interest of capitalist accumulation requires the state to take over the banks, wipe out the shareholders, write-off the toxic assets so the process of capitalist accumulation can start anew. The demands of finacne capital and the inability of the American state to act autonomously of them is slowing down the process of capitalist accumulation and this is NOT in the long term interest of capitalism. Basically, capitalist cannot see the forest (longevity of capitalism) and are only focused on the tree (their immediate profits). Capitalists do have a common interest; it is maximizing their profits. Sometimes, however, maximizing profits are destructive to the entire process of capitalist accumulation. An autonomous state is needed to make sure that capitalism survives. The American state is no longer autonomous.

Posted by: ndahi | Apr 4, 2009 2:04:49 AM | 18

The state can and does act against the short term interest of the capitalist class, ie, maximum profit in order to keep the process of accumulation going and the system legitimate. That is what is meant with RELATIVE state autonomy.

Maybe a way to look at this is some individual capitals in the interest of obtaining profits above the average rate of profit capture state institutions and regulatory apparatuses. This is less the case among capitals engaged in "coercive competition" in the real economy. There, the capitalists struggle for higher profits by improving productivity and lowering labor costs (quickening production of "relative surplus value").

But among the finance capitalists, the game is regulatory capture to expand the opportunities of primitive accumulation. This is nothing more than figuring out ways to rob workers.

So, here it seems with finance that the state is incapable of a kind of autonomy oriented to rational response to crisis. Is this what you mean?

But, at another level of analysis, one can argue that the reflexive accommodation by government of finance capital makes sense, given the long period of crisis since 1970 of declining growth rates and profits in the real economy, and the rational move into finance capital as a way to confiscate wealth from workers.

If this is the case, then the "autonomy of the state" is predictably regulated by this movement of capital, and it may be unproductive to entertain the idea that the contemporary state can divest itself from these big structural tendencies.

So, I agree with your keen description above.

Maybe "civic republicanism" can save us!

heh.

Posted by: slothrop | Apr 4, 2009 12:40:41 PM | 19

http://online.wsj.com/article/SB123879462053487927.html#mod=testMod>A little good ol' regulatory capture.

Posted by: slothrop | Apr 4, 2009 12:51:37 PM | 20

One more thing.

The global crisis and the inability of prevailing institutions to address the root causes, makes a further mockery of the
"empire" thesis. There are real problems of growth in the old core, solved by rising exploitation and finance rip-offs.

Even in Germany!

Posted by: slothrop | Apr 4, 2009 1:24:12 PM | 21

slothrop, why are you angrier at Germans than at our international masters, whose control you evidently ken? i.e. why attack victims over victors? Also, our host is hospitable, sensible, wise. Why spit?

Posted by: plushtown | Apr 4, 2009 6:40:01 PM | 22

The comments to this entry are closed.