More Applied Lying For Dummies

And just when I think the adults are allowed to be in charge of the economy, we get stupid crap like this assuring that billions more dollars will be lost as the Son of the Ghost of Creative Accounting rears its ugly head once again.

The proposed FASB rule, according to a release from the agency, "provides a framework for measuring fair value and a definition of fair value that contemplates an orderly transaction between market participants, not a forced or distressed sale."

It goes on: "In the current economic crisis, many constituents have requested additional authoritative guidance to assist them in determining whether a market is active or inactive, and whether a transaction is distressed. Proposed FSP FAS 157-e would provide this application guidance."

In other words, if a bank asserts that the market for a certain asset is "inactive," then it need not write the value of it down to market prices. Critics such as Grayson insist this change would allow banks to continue a fiction of viability when in fact they may be insolvent.

"I think the real reason this has come up now is because a lot of the institutions are genuinely insolvent and don't want to admit it," Grayson said.

Once again we're asking for the ability to seize insolvent banks with one hand, and then denying ourselves the ability to determine the true financial status of the banks with the other.

Great. The banks of course will say that nearly all toxic assets are in inactive markets. Thus, all the assets are worth 100% of what the banks say they should be. So, now the Obama administration can say "Well, we can seize these banks, but as you can see here the banks say they are all solvent." These supposedly solvent banks will then get to participate in the Geithner Plan and get free money by selling these assets at the prices the banks want to sell them at to the American taxpayer.

Then we get stuck with billions of dollars spent on something really worth 20 cents on the dollar.

It's maddening, and yet there's nothing we can really DO about it.