On Thu, 25 Sep 2008 13:44:25 -0500, cavelamb himself
wrote:
John R. Carroll wrote:

I saw it Richard and it just ain't so.
Mortgages and the bonds they form aren't really the problem that the current
bail out seeks to address.

That you believe this to be the case is completely understandable but not
true.

Sorry John, but please note, unlike a lot of people here,
I'm ASKING not TELLING.

Because, frankly, I don't have a clue what to believe.
---------------------
When embezzlers are caught, they always blame the auditors.

What something is "worth" is one of the basic philosophical
questions, and "worth" will vary from person to person.

One of the reasons for accounting is the establishment of the
financial "health" of an organization, one very significant
factor of which is their solvency, or "net worth." Net worth is
defined as "assets" less "liabilities," and one of the basic
reasons for outside auditors is to obtain an independent and
unbiased opinion as to the accuracy and legitimacy of the assets
[overstated?] and liabilities [understated?].

The solvency of an organization ==is its condition at the
present time,== not what it was at some period in the past or
what *MAY* be at some period in the future, but currently.

The actual culprit here appears to have been the bond ratings
organizations such as S&P, Fitch, Moody's etc. which assigned a
AA or AAA investment grade rating to novel securities such as
synthetic structured residential mortgage backed collateralize
debt obligations with no history, and no knowledge of or
experience with such securities.

Indeed, many of these securities are so complex [CDOs exist that
are backed by or based on other CDOs] they could only be analyzed
by computer programs, and unfortunately many of these programs
have been discovered to have errors and omissions which oddly
enough rated the securities many levels too *HIGH* [I am unaware
of any computer analysis which rated the securities too
low/risky]

At some point an asset is worth what it is worth, no matter what
the owner thinks or wishes. In this case Mr. Market said these
many of these SSRMBCDOs are now worth 10 cents to 30 cents per
dollar of their face value, and some are worth nothing. It is not
the accountants' fault that 2 + 2 still equals 4, and not 6 or 8
as the CEO would like, no matter how hard he pounds on the table.

If the banks and brokerage houses collapse as a result of honest
accounting, too bad. At least this stops them from sucking up
additional capital. If "mark to market" had been in effect, it
is highly likely that Enron [and many others] would have
collapsed years earlier, and spared the state of California the
electric screw job, as well as preserving huge amounts of capital
for their employees who continued to invest in their 401 k plans.


Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).