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Does the New Ever Get Good?

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March 14, 2008 – Comments (1)

Seems policy makers expected the financial crisis to be accounted for by now, and urge banks to quickly disclose losses.  Seems to me that this will not happen because there are losses yet to be realised because of all the mortgage resets still coming and the lack of being able to predict how many will walk from mortgages and how far housing will fall.

Given that the average person is clueless about what has happened -- certainly I didn't follow the markets and was clueless about the problem when I started -- it is no surprise that policy makers are also clueless.  I think too many of them have less than adequate math backgrounds.  Third year calculus ought to be a requirement to run for office.  That way you'd have some understanding of the depth of leverage.

The SEC is supposed to be giving a wider range of options for valuing securites. That just seems like an increased opportunity to lie about value.

Then there are plans to eliminate the deficit by 2012.  Good luck with that one.  I think the last month's deficit worked out to almost $600/person.  If they stay on target it would be $1200/person, but it doesn't look like they will be given they had about 45% of the projected deficit in a single month.  Add the aging population.  Add that only about half the population works.  Add that when you make cuts you further reduce revenues.  It took Canada about 12-15 years to balance our budget.  Ending the war would probably be the fastest measure to help the budget.

Apparently hedge funds have been moving money out of Bear Stearns over concerns for financial safety.  The last link of the link says:

"According to Bear filings, at the close of the fiscal year in late November, the company had $11.1 billion in tangible equity, an important measure of its worth. Its gross leverage ratio, a gauge of the funds it has borrowed against its equity, is about 33 to 1. Goldman, with tangible equity of $42.7 billion, has a leverage ratio of 26 to 1, according to its filings.

To my way of thinking, with that kind of leverage I'd be out of both of those places. 


 

1 Comments – Post Your Own

#1) On March 14, 2008 at 9:19 AM, dwot (97.58) wrote:

Damn, another typo in the title...

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