Monday, March 09, 2009

It just gets worse

Today I'm reminded on two fronts that government intervention in the economy is like using a sledgehammer to fix a crooked wall hanging.

#1- Wall Street Journal reports that we're moving right back to a credit crunch (subscription required unless you're Google-savvy like me).
"bond investors worry the government's repeated modifications to its financial-rescue packages are undermining the very foundations of bond investing: the right of creditors to claim their assets first if a borrower defaults. Without this assurance, bonds of even the most stalwart institutions are much riskier to own."


#2- John Jansen spreading rumors on the Street:
"Some bond market participants have taken to focusing on a Congressional Committe hearing on March 12 which will discuss the imbroglio which surrounds the topic of mark to market accounting. Some suspect that the Congress will suspend the rules and suspension of those rules will spark a huge equity market rally."


I asked our accounting department chair for his thoughts:
"Once the government starts meddling temporarily with accounting rules you can forget about the idea of independence."
He (and others in the industry that I've read) has previously said any such suspension would be a big mistake because once we've started down the mark-to-market road it's very hard to go back.

Someone please tell me how we're not hosed.

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