2009 - %3, March

Mark to Market

| Tue Mar. 31, 2009 10:34 PM PDT
The Wall Street Journal reports that FASB will vote soon on a proposal to loosen rules that force banks to value toxic assets at market prices:

The Financial Accounting Standards Board is proposing significant changes to its mark-to-market rules, allowing banks to set their own values for certain hard-to-value troubled mortgages, corporate loans and consumer loans. The new proposal, called FAS 157-e, is scheduled for a vote this Thursday.

The change was meant to assist U.S. banks after bankers complained current mark-to-market accounting rules forced them to undervalue their assets, by setting prices at deeply discounted, fire-sale values.

This is a complex issue, and it's true that mark-to-market can cause problems during financial panics as firms all start selling assets at once to cover losses, which in turn produces a spiral of plummeting prices, leading to losses, leading to more selling, leading to lower prices.  Rinse and repeat.  Unfortunately, the alternatives are generally worse, allowing banks to value assets using models that can be tweaked so egregiously that they bear only the vaguest relation to reality.  That's how IndyMac could claim it was "well capitalized" right up until the day it was taken over and shown to be a shell of its claimed self.

My tentative preference is to keep mark-to-market but soften its impact with a system of countercyclical regulatory forbearance.  The whole point of bank capital is to act as a cushion against losses, and in good times a bank might reasonably hold capital equal to, say, 8% of assets.  During a recession, as loans and other assets lose value, that capital is going to get eaten way, but then, that's the whole point of having it in the first place.  So why force asset sales in order to maintain arbitrary capital ratios when capital erosion is entirely predictable during recessions?  Why not instead require higher capital ratios in good times (which would reduce leverage and slow down credit expansion) and lower capital ratios in bad times (which would reduce fire sales and encourage banks to expand credit)?

Because banks are so good at lying about the quality and value of their assets, we're better off with a system that gives them as little leeway as possible when it comes to recognizing losses.  We're should force them to face the music honestly, but then allow a certain amount of capital forbearance during economic downturns.  Mark-to-market isn't appropriate for every asset, but it's appropriate for most.  It should be watered down as little as possible.

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If Drum Can Cat Blog, I Can Kid Blog

| Tue Mar. 31, 2009 10:11 PM PDT

Out of nowhere, my 5-year-old daughter looks up from her crayons and asks, oh so seriously: "Mom. If I become a mermaid, you'll tell me, right?"

What could I say but, "I promise, honey"?

Update: My 7-year-old is wrestling with my 5-year-old. As I head over to pull the abnormally tall second grader off the average height kindergartener, I hear her say: "Get OFF me! My bootie is soooo important to me!"

Seems he was pushing her down into the couch cushions under which was hidden a huge cache of pointy Legos. 

One Pathetic Tip for Surviving the Recession

| Tue Mar. 31, 2009 10:08 PM PDT

Salon has a piece up about the world of hard core scavengers. It's not as gross as it sounds, once you know what you're doing. And get over your pre-Bush/recession heebie jeebies. It put me in mind of a kinder-gentler dumpster diving con I just discovered.

I stumbled on this scam last week when I scraped up the bucks to take the kids to their favorite restaurant (where they scarf down the bread which I've tried, and miserably failed, to recreate Chez Dickerson). They of course call it, "The Bread Restaurant." When I realized I'd left my reading glasses at home and was playing trombone with the menu, the waitress said "I'll be right back."

Turns out they keep a jar full of left-behind reading glasses. Now I pull this sad fake out at every Chili's and above restaurant. It's only fair: I've lost three pair so far this year and it's not quite April. Someone scored mine, right?

Hayfever? Just Blow Your… Knob

| Tue Mar. 31, 2009 7:22 PM PDT
Health alert: Spring and hayfever go together like, well, sex and sneezes. All those flowers. All that green grass. Kachew.

But, guys, you get a break on this one. A neurologist from Tabriz Medical University in Iran proposes that a well-timed ejaculation will clear your bunged nose. Too.

The logic goes like this: the nose and genitals are both connected to the sympathetic nervous system that controls certain reflexes. A blocked nose is caused by swollen and inflamed nasal blood vessels irritated by an infection or by pollen in the air. But during ejaculation the sympathetic nervous system constricts blood vessels across the body. That should soothe the swollen nasal blood vessels, freeing the airway for deep, er, that is, normal breathing.

Sina Zarrintan, the neurologist, says he hasn't actually tested this yet. Right, and the pope doesn't have wet dreams.

But if it works, whacking off could offer many advantages over decongestant drugs, which can cause hypertension and make congestion worse over the course of a few days, writes Zarrintan in Medical Hypotheses.

He suggests masturbating or having sex whenever the symptoms are bad enough to warrant another ejaculation. And when aren't they? The patient can adjust the number of intercourses or masturbations depending on the severity of the symptoms, he says. It's the best scrip of all: Take as needed.

Work this in with a little sneeze fetishism and it gets downright fun to be miserable in the spring—if you're a guy, that is. Global warming gets some much-needed kink.

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