I posted this in another thread, John, but it's more on topic here.

This is what Dave Ramsey said on his site.
Basically, the whole mess was caused by a change in the accounting laws
(as a result of the Enron mess).



http://www1.daveramsey.com/etc/fed_b...up_10887.htmlc



Remember Enron, WorldCom, Adelphia, and other companies had artificially
put assets on the books? They'd say something was worth $10M when they
bought it, but eventually it decreased in value, and they never updated
the value in the books. That was part of the fraud. Under current laws
at that time, they were all convicted and put in jail for fraud.

Then we got all mad and made all these new laws that are coming out the
wazoo called sarbanes oxley. It's a huge, massive law but the idea is
that we were going to mandate ethics to corporate America because
apparently they didn't have any, according to the Enron failure. It's
now a total pain in the butt to execute it in a publicly traded company.

It didn't work because you can't cause ethics to happen. However, it
does make each company each day restate what their assets are worth if
sold on the market. This accounting procedure is mark to market
accounting--you need to remember that. It's a good concept and keeps
companies from having loaded balance sheets.
How This Affects Us Today

However, it's part of what's caused this in the news now. Merrill Lynch
was sitting with $30 billion tied up in sub-prime loans with houses.
Stupid! They get what they deserve for doing that, and I'm with you on
that. Those houses didn't become worthless all of a sudden because those
people couldn't sell their bonds. Since they couldn't sell them, they
basically gave them away for 22 cents on the dollar. Now do you think
all those houses lost 80% of their value underneath that deal? No, they
didn't, so they gave them away for 22 cents on the dollar (about $6
billion total) because there was no market for them. Nobody wants to buy
sub-prime bonds because they suck. They're junk bonds. But at 22 cents
on the dollar, it's a bargain because even if you foreclosed on every
one of the houses in there, you'd probably get $20 billion back out of
$30 billion, and so the company that bought those for $6 billion got a
deal! But there's no market for them. That's where these companies are
stuck. They can't sell this stuff, but accounting-wise, they've had to
mark it down to market and it's frozen the marketplace.

Economist Wesbury is saying that if we change that one rule and don't
force them to mark down to market value and just let them hold on to all
the stuff, and say just on sub-primes for this period of time you can
change that rule -- a temporary change -- that'll free the market up.
It's seized right now; it's frozen. This will thaw it out and get it
going again. He says that'll solve 60% of the problem ... and I think
he's right.

That one accounting rule is what made Merrill Lynch sell out. That one
accounting rule is what's driving other ones into the dirt. Would you
rather let them change their accounting rule or loan them $700 billion
for us to buyout their bad paper?

I'd rather them work their own crap out than change the accounting rule.

I don't like giving them any money or any help with my tax dollars. But
I'd rather see that than see the whole thing turn completely upside down
in a fruit basket turnover than have a whole meltdown or something and
freak out here in the middle of the election season. Why don't we just
take the FHA insurance program and extend it across these sub-primes?
What that means is that you and I are guaranteeing the lender that
they're not going to lose as much or any money on those mortgages. Now I
don't like guaranteeing them, but I like it better than buying them. In
other words, instead of $700 billion in tax-payer debt going out there
to bail out these companies, just extend the insurance out. You could
probably do that for less than $40 billion. It's like a 95% savings!

If the government insured those mortgages, they would then be
marketable. And could sell them. And the companies would stay afloat.
And we, the people, don't have to get into the mortgage business. Now
we're going to get in there a little bit because of the insurance on
those getting foreclosed on. But foreclosures aren't causing this. This
is being caused because these companies are frozen and seized up. We've
got to let some of the steam come off and put some oil in there to get
this thing moving again. We can do that without going into debt $700
billion.
Here's Your Plan

Call your Congressman. Call your Senator. Tell them to change the
mark-to-market accounting law and to extend insurance but extend no
loans. If they extend loans - if they borrow the money on the national
debt in order for us to all go into the mortgage business a trillion
dollars - you're going to fire their butts and send them home.

I've talked with several people today, and it's on the tables in
Washington, but it's not something you're going to see on TV. If you'll
let your Congressmen know you know about this and that you'll vote
against them if they don't vote to change the mark-to-market law and
you'll contribute your money to make sure they never serve in office
again. That's what you need to tell them early and often.