Monday, October 27, 2008

Another clear explanation of "Mark to Market" rules and how they created the current financial chaos...

I enthusiastically recommend that you jump over to "Heckonomics: Mark-to-Market," at the web site, where you will find the clearest and most straightforward explanation of the Mark-to-Market banking regulations, and how they were key to destroying our financial system.

It echoes my own views in an email discussion with a friend a few weeks ago. The above is worth clicking, because you will be a lot clearer on this than you were five minutes ago.

As a libertarian, I am weirded out by this. I've been reading recent triumphant editorials about how 'massive deregulation' of financial markets is at the core of the disaster, where gimlet-eyed government regulators weren't allowed to pull us back from disastrous misadventure. Yet the actual government regulators on the banking side (yes, there are a *few*) completely failed to consider the impact of mark-to-market regulations -- *their* regulations -- and apparently never considered, or recommended, or mentioned, the possibility of suspendng, or temporarily softening, these regs in order to relieve pressure on otherwise sound banks -- a much cheaper and faster resolution to the panic than the huge spending plan and takeovers we'll be enduring for months if not years. 

Of course, being a libertarian, I can't help noticing that these same government regulators (unless you've got another, more competent crop somewhere else they plan to bring in just for this), the ones who would be smart enough not to let banks and brokers invest in newfangled financial instruments -- are the same government regulators who weren't smart enough last month to *notice* that their existing regs--inflexible, unadaptable regulations--were strangling the banking business.  

Maybe it was because they didn't read about it in the papers, because none of the financial reporters appeared to notice or ask about it. Then or since.  

I am disgusted with all of them and everything about this.


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