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Archive for June 2nd, 2008

Up is downism hits the financials

Posted by Charles II on June 2, 2008

Suppose that you had a hole in your pocket, so that for every step you took, a $20 bill fell out. As you walk along, you rejoice, because with every bill that falls on the pavement, you are $20 richer! That, believe it or not, is exactly what banks holding bad mortgage paper are doing.

Bradley Keoun, Bloomberg:

Merrill Lynch & Co., Citigroup Inc. and four other U.S. financial companies have used an accounting rule adopted last year to book almost $12 billion of revenue after a decline in prices of their own bonds. The rule, intended to expand the “mark-to- market” accounting that banks use to record profits or losses on trading assets, allows them to report gains when market prices for their liabilities fall.

The new math, while legal, defies common sense. …

“They can post substantial gains as a result of a decline in their own creditworthiness,” said James Cataldo, a former director of treasury risk management for the Federal Home Loan Bank of Boston and now an assistant professor of accounting at Suffolk University in Boston. …

Here’s how it works, according to Richard Bove, an analyst at New York-based Ladenburg Thalmann & Co. A company decides to designate $100 million of its subordinated bonds as subject to mark-to-market accounting. The price of the bonds drops to 80 cents on the dollar from 100 cents. So the firm books $20 million on the “presumed savings that you have on your liabilities,” Bove said.

“In the real world you didn’t save a dime,” he said. “You still owe the $100 million. It’s another one of these accounting rules that basically takes you further and further away from reality.” ..

So far, most banks’ writedowns are “unrealized,” meaning they’ve been unwilling or unable to liquidate distressed assets. If prices reversed, the banks would record mark-to-market profits.

The same is true for the liabilities. Companies can’t “realize” the mark-to-market gains on their debt unless they buy it back at the discounted price. …

Worthington estimates that similar tightening of bond spreads at Merrill, Morgan Stanley, Lehman and Goldman Sachs may cause them to reverse $5.96 billion of revenue by the end of the year.

Heads they win, tails we lose.

Posted in corruption, economy, mortgage crisis | Comments Off on Up is downism hits the financials

Monday Morning News Roundup

Posted by Phoenix Woman on June 2, 2008

— What a difference a change of leadership makes: Australia has ended combat operations in Iraq. With luck, we should be following them, in gradual steps, by this time next year.

— Hillary Clinton’s trying one last effort to grab superdelegates from Obama, but the handwriting’s on the wall: Members of her advance staff received calls and emails Sunday evening from her campaign headquarters summoning them to New York City Tuesday night, and telling them their roles on the campaign are ending. Since a campaign’s advance staff is responsible for arranging the candidate’s events around the country, this is a sign that Senator Clinton herself doesn’t anticipate a need for any more candidate events, since up to now she’d been running a full campaign schedule despite being around $30 million in debt, mainly to herself. (Hat tip to Al Giordano at The Field.)

— Who knew? Men prefer being single to being in bad marriages. So do women, at least the ones I know. I’ve always wondered what the impact of higher life expectancies has been on the willingness to wed.

Posted in 2008, Australia, Barack Obama, Good Things, Hillary Clinton, Iraq war | Comments Off on Monday Morning News Roundup

Will the U.S. Snooze Media Notice This Story?

Posted by MEC on June 2, 2008

The UK’s Independent reports that a Muslim seminary “which is said to have inspired the Taliban” has issued a fatwa against terrorism.

Senior clerics from the 150-year-old Darul Uloom Deoband issued the edict saying they wished to wipe out terrorism. “Islam rejects all kinds of unjust violence, breach of peace, bloodshed, murder and plunder and does not allow it in any form,” said the rector, Habibur Rehman, to the cheers of thousands of students. Many held placards saying “Islam means peace”, while others chanted.

So far, Google News lists stories about this in newspapers from India, South Africa, Canada, various Asian countries, Reuters … but none in the United States. Maybe Muslims are only newsworthy in the U.S. when they’re associated with terrorism.

Posted in beat the press | 3 Comments »

The McCain drinking game

Posted by Charles II on June 2, 2008

(in which, if he’s elected, anyone with any sense will get and stay drunk)

Tomasky in the NY Review of Books has an inevitably amusing take on John McCain (via t/o):

It was on Capitol Hill that he met and befriended important senators – Gary Hart of Colorado, William Cohen of Maine, and most of all John Tower of Texas, the buddy to whom he was closest during a period of his life that included its share of carousing and irreparably strained his marriage to his first wife, Carol. When asked to explain the dissolution of their marriage in the late 1970s, she said, “I attribute it more to John turning forty and wanting to be twenty-five again than I do to anything else.”

Read the rest of this entry »

Posted in abortion, Busheviks, corruption, hypocrites, immigration, Iraq war, John McCain, McCain lobbyist scandal, mediawhores, Republicans acting badly, torture | 3 Comments »

Because There’s Always Room For Homer And Jethro…

Posted by Phoenix Woman on June 2, 2008


Big hat tip to Ollie at BSP for this.

Posted in Uncategorized | 2 Comments »

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