A New Rule Change That Could Hurt Taxpayers

I lost tens of thousands of dollars in my 401K and personal accounts due to this crisis. I happily participate in this bailout through my taxes if it means I can recover some of those losses. A no vote would not punish the CEOs of those banks as much I would wish it to them. They have secured their money in offshore accounts. It will directly hurt the little people. As for me, it is not just the banks. Whoever bought cars and houses on credit, without being able to repay should also not be bailed out. Brainless people have houses that now have to be payed through taxes from those who act responsibly. There is no constitutional right to max out your credit cards and then be helped when destiny bites back.

When I was planning for retirement, I made sure my car was paid off, and my one credit card was paid off. Although I worked all my life I never worked for a company that had a retirement plan, or 401K until 8 yrs before I retired. There was not much money in that 401K, and I used it to make repairs on my home. After 6 months of retirement I had to go back to work, SS is not enough, especially since the rise in oil prices spiked my heating and electric bill, and I still had a mortgage to pay. I have been a widow for 18 years and there were times I worked 3 jobs so I could make my mortgage payment on time. DO THESE POLITICIANS THINK I WANT TO BAIL ANYONE OUT??? NOT!!!!Let the chips fall where they may, America will survive, we always have, and just maybe we will be stronger for it. To all the Dems from MA no vote from me, you all need to move on and out of politics since you don't listen to the "folks" anyway. That "bailout bill" is still going to pay big bonus's and golden parachutes for the exec's that caused some of the problem.

"Mark-to-Market" once elected by a firm must be used, you can't without IRS change jump back to Averaging or other methods. I got the impression from this article that the companies could pick and choose, I don't believe that's correct. Also, on the uptick, "Mark-to-Market" accounting inflates the corp. book value without any real (earned ro realized) change in the actual asset. This is one of the methods exec's can use to cook the books and qualify for large bonuses.

I emailed the last two sections of the article to my Senators and urged them to not support the proposed Senate bill.

This would benefit MAINLY children who at later ages would be able to tap that fund OR let it build VERY well over their lifetime. it'e not ESOPs it's CSOPS - Citizens Stock Option Plan All hail Kelso !

enough with "blaming the homebuyer"! borrowers had mortgage insurance tacked on to their house payment, they had to pay the premiums every month. the bank "handled" the insurance. that's where the problem is. the homebuyer bought and paid his insurance against default, but wall street didn't. they shell-gamed it instead. now the jig is up. so it's nothing but a massive insurance fraud perpetrated by wall street. end of story.

by SSN account, I mean give everyone an account at Goldman keyed on SSN

I see LIBOR triples as these ARM's reset... augh! Poor folks... Just days before today - people resetting MIGHT have been saying: "Ok, we CAN do this, mortgage is $2345" but with LIBOR at 3x ? the reset I take it then becomes ? Well, just DAYS ago, that reset probably would have been on top of about 3% LIBOR now ? it's up nearly 5% riding on about 8. For a decent slide ? chuck in another 5 ? That's 13% now instead of 8% reset. ALMOST double. if you're reset expected when LIBOR was down last week was to be $2500 a month ? Try more like $4250 now ! Heh- housing is going to dump which will furth push prices down. I say take all the federally funded corporate ventures as of late, and literally turn over the profits - ALL the profits to the taxpayers - dump it into a SSN account. Let Goldman manage them. Everyone wins. Faith, confidence is restored. Who'd want to doubt their nation states corporate assets if they own them ? Grandma and Grandpa don't become $ feedbags to the next generation. No one pays into SSN anymore. that money goes right into the economy. Makes sense to me.

They can't have it both ways. When housing prices were going through the roof the companies holding these bonds were taking the gains by marking them to market, now that they have went south they want to change the rules.

Suspend mark to market for a couple weeks and see what happens. I agree with Scott. We may be able to avoid writing a check at all. I have more confidence in the "greedy" Wall Street folks getting themselves out of this rather than congress. What smart financial moves has the Government ever made? I see only trouble coming and a more powerful government if ANY form of bailout is approved.

To Scott, Not all of the mortgages in this mess are first leins which would suggest that some of these things are worth nothing. The complicated repackaging, "securitization," caused bankers to lose track of what actually went where and how much(the genius idea of spreading risk using mathematicians and physicists). The uncertainty in the marketplace coupled with increasing defaults(some of which are second mortgages and paid nothing) makes pricing impossible and therefore justifies such a low price. To Larry, The govenment bailout as is currently stands MAY be unfair to the American public...it's 350 pages long, I haven't had time to read it yet. But liquidity is dry and this package alone is the only thing that will get people to start lending to each other(Increase the velocity of money). As any economist will tell you increasing the velocity benefits everyone in a society, especially those that are borrowing money(make loans affordable).

WHATEVER HAPPENED TO GOOD ACCOUNTING PRACTICES. AS AN INVESTOR, I WANT THE BALANCE SHEET TO REFLECT ACCURATE INFORMATION. IF IT IS ONLY WORTH $.22 ON THE DOLLAR THEN THAT IS WHAT SHOULD BE ON THE BALANCE SHEET. WHERE DOES THE AICPA STAND ON THE ISSUE.

Great article! I completely agree that this subsection leaves a loophole that is contradictory to the intention of Section 101.e (Preventing Unjust Enrichment). Valuation of these 'toxic' assets appears to be the pivotal issue in this entire plan. JPM got WaMu at a huge discount because that is how the free market works. However, the Fed is not going to 'bid' on securities, they are going to rely on the institution to value them and then simply pay that amount. You wouldn't pay a premium for an imitation watercolor at a garage sale just because the owner claimed it was an original. After combining mortgages into bonds and then slicing and dicing them, what is the real value and how can it be proven? How can the Fed suggest that there is little risk in this plan and more likely, gains to be realized? How can the agencies, companies and officials that allowed this situation to occur in the first place be put back into the middle of the 'solution'? Doesn't it seem 'backward' that Congress and the Administration is in a hurry to solve this problem and the American public wants to slow it down? We, the American public (aka "Please don't call us Mainstreet"), understand more than we're given credit for. We know there are problems and where they came from. We just want to make sure there is enough time allowed for the 'sausage' to be made.

I am tired of hearing how everyone thinks this is going to open up the credit markets. Th banks are not just going to all of a sudden start lending to people that they would not have a week ago. Underwriting is back to the basics. You need the capacity, the character and the credit to be approved for loans. A lot of people don't have the capacity right now because of the run up on credit cards. A lot of people are lacking character because they are letting go of there houses. A lot of people are lacking the credit because they let go of there houses and ran up there credits cards. Do you think the banks are going to lend again because i the bailout? NO!! In addition the $250,000 FDIC insurance also does nothing. Most people that closed there accounts at Washington Mutual and other failing institutions did so not because they thought there deposits were not insured but did it because they did not want to deal with a closing or merging bank. Everyone saw the lines that formed outside Indymac and everyone does not have the time or patience to deal with that. I myself have less than 100k and I would be at my banks front door if I thought they were in any trouble. Lets stop kidding ourselves!!!

Well written article - takes away the mystique of the AICPA version. Thanks

and further more they should be waived of captal gains and windfall profit taxes. When the asset is catergorized and a Total Value Price is allocated to each TARP asset it should be sold through a national housing lottery to average citizen's with the same tax waiver. This is a win win situation that empowers taxpayers to pay the debt and remove the burden of this generations debt from the next generation. Grace be with you all....

while the taxpayers hurt,who benefits from the loopholes?

I am disappointed that Government, Administration,and Wall Street have continued to adopt an "us vs. them" mentality and dialogue to deal with and talk to America. Where is the "we are all in this together" rhetoric? It seems that we have a standoff "crabs in a bucket" mindset and neither side is going to do whats best for the country until they get what they want. Who is at fault doesn't matter. Are all parties willing to go under just to prove a point?

I think its interesting that Congress tells us we may make money off of this. The problem is, they mean the Government makes money. We won't see any of our money back. We will only continue to pay more each year to cover this. This is not the right choice. No Bail out.

The crisis as had been repeatedly told in the media is believed to have been caused by a slump in the US housing market, with untold numbers of so-called sub-prime borrowers defaulting against home loans. So am I to believe that the foreclosures caused the evaporation of the values of the properties that collateralized those loans? Not likely. In fact those properties still exist and hold a great deal of value. The problem is that of a lack of cash flow. Mortgages are not being paid and that problem has the investors crying for relief. Where does the risk lay when some poor bastard picks up the phone and calls Uncle Sam to cover their bets? I do not remember seeing in any financial prospectus that the Federal Reserve will back up your losses on your investment(s). Some will argue that the alternative is that of a second great depression. Well maybe that is a distinct possibility but I for one feel that we as a nation are smart enough to figure out what we need to do to prevent our nation from crumbling to dust just for the privilege of having a line of credit. The credit industry is the single greatest benefactor for that bailout. You and I are just getting set up for a major shearing by those very corporations that are just sitting back and waiting for our congress to pass a bill to bail them out of their mess. Even though they had been bleeding the nation with usury level interest rates and unjustifiably high fees applied to the credit balances of millions of Americans for decades we are asked to give more of our hard earned dollars to those thieves. This is symptomatic of a far greater problem.

I couldn't disagree more. The point of adjusting the mark to market accounting rule won't hurt the taxpayers, it has a chance of saving us from writing a $700b check. This is another option that needs to be considered before the check is written amid screams from the American people that they do not want to bail out companies who made poor financial decisions. First, Merrill sold off their assets for $.22 on the dollar. That's almost an 80% discount, do you really think the houses that were backing those bonds lost 80% of their value? Of course not, that's absurd. Take any of those houses and discount them 25-30% off of their value and they will sell quickly. So, why should the banks have to go out of business when the assets backing their bonds still have some value, certainly more than $.22 on the dollar. The difference is that at $.22 on the dollar they are going out of business, but at $.75 on the dollar they can stay afloat until the market turns back around. They will take losses, as well they should for having made poor decisions. At least this way, we Americans won't have to pony up our checkbooks and write checks for banks who have shown they can't handle money. Even if this doesn't work, at least it's another option to consider before going another trillion dollars in debt. So, don't get rid of the mark to market accounting rule, simply put a temporary suspension on it in the sub-prime mortgage market so the banks can value the bonds at the true value (the home's value), then let them ride out these tough times until the market corrects itself.