Fight disinformation. Get a daily recap of the facts that matter. Sign up for the free Mother Jones newsletter.


MARKET REFORM UPDATE….Dean Baker is unhappy with the SEC’s decision to ban short selling in financial stocks:

So where does the SEC get off banning shorts? Has it determined that bank stocks are undervalued? How did it make that determination? Does it ever determine that stocks are overvalued and therefore ban buying?

….If the issue is price manipulation, it is hard to believe that this is the first time market actors have manipulated prices. If they have the ability to do it on the down side now with financial stocks, then presumably they have also manipulated stock prices on the upside on other occasions. Why is the former worse than the latter?

Point taken. I probably agree, though I don’t think I object to temporary restriction during panics. For a more impassioned defense of restrictions on short sellers, “Mad Money” senior writer Cliff Mason has you covered in comments to yesterday’s post on the subject.

On another subject, Jon Taplin believes that one of the financial reforms we should insist on once the immediate crisis is resolved is to do away with mark-to-market accounting. He quotes William Isaac:

Fair Value Accounting dictates that financial institutions holding financial instruments available for sale (such as mortgage-backed securities) must mark those assets to market. That sounds reasonable. But what do we do when the already thin market for those assets freezes up and only a handful of transactions occur at extremely depressed prices?

….When there are temporary impairments of asset values due to economic and marketplace events, regulators must give institutions an opportunity to survive the temporary impairment. Assets should not be marked to unrealistic fire-sale prices.

This is an old controversy, and I won’t pretend to have a sophisticated opinion about it. Still, I’d be careful about “reforming” this. Mark-to-market is a basic matter of transparency, and overall it helps prevent financial abuses by keeping banks from hiding worthless crap on their balance sheets. Our goal should be to prevent (or ameliorate) panics in the first place, and if we do that then mark-to-market is a feature, not a bug. I’d be inclined to move very slowly on this one.

HERE ARE THE FACTS:

Our fall fundraising drive is off to a rough start, and we very much need to raise $250,000 in the next couple of weeks. If you value the journalism you get from Mother Jones, please help us do it with a donation today.

As we wrote over the summer, traffic has been down at Mother Jones and a lot of sites with many people thinking news is less important now that Donald Trump is no longer president. But if you're reading this, you're not one of those people, and we're hoping we can rally support from folks like you who really get why our reporting matters right now. And that's how it's always worked: For 45 years now, a relatively small group of readers (compared to everyone we reach) who pitch in from time to time has allowed Mother Jones to do the type of journalism the moment demands and keep it free for everyone else.

Please pitch in with a donation during our fall fundraising drive if you can. We can't afford to come up short, and there's still a long way to go by November 5.

payment methods

ONE MORE QUICK THING:

Our fall fundraising drive is off to a rough start, and we very much need to raise $250,000 in the next couple of weeks. If you value the journalism you get from Mother Jones, please help us do it with a donation today.

As we wrote over the summer, traffic has been down at Mother Jones and a lot of sites with many people thinking news is less important now that Donald Trump is no longer president. But if you're reading this, you're not one of those people, and we're hoping we can rally support from folks like you who really get why our reporting matters right now. And that's how it's always worked: For 45 years now, a relatively small group of readers (compared to everyone we reach) who pitch in from time to time has allowed Mother Jones to do the type of journalism the moment demands and keep it free for everyone else.

Please pitch in with a donation during our fall fundraising drive if you can. We can't afford to come up short, and there's still a long way to go by November 5.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate