Sep. 30th, 2008

firesion: (Default)
The market was up today on the idea that they might change the accounting rules to allow companies holding home backed securities to set the price of those securities any way they want. Right now they must set the price at "market" value which means the value they would get if they sold it today. So in the end they have to mark the stuff down quite a bit because it does not have a current high value. If you let them choose the value they use the stuff to cook the books. It is great for the company, because you just made it possible for them to literally do just about anything with their balance sheet. All of this would be hidden from the investor and thus would lead to very shady business practices.

The best solution to start with is to require the securities to be traded the same way as OJ. That way an investor can look at the balance sheet at any point. Get the current market value of the security and do a quick calculation to see how a company is doing.

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firesion

January 2009

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