Misery Called Life wrote:MTM was the sole problematic issue. But isn't MTM accounting only incorporated with investment banks for contingent liabilities?
AIG's collapse was entirely due to MTM, as the businesses were working fine, but they failed a collateral call.
What about commercial banks. Do they do incorporate MTM? In UAE there are many many debt issues. Very few are actually accessible to the general public. These debt issues are normally purchased by large investment companies in turn owned by Sheiks and other very wealthy investors.
Besides as far as interbank lending in the middle east is concerned Repo rates are still pretty high in Saudi and UAE. And there are no signs of a cut.
So the lending has to be spruced by accounting changes(asking for trouble since I'm not sure how widespread MTM is over here) or shoring up capital bases through debt issues.
MTM the sole problematic cause of this crisis?
You sound like a real Keynesian boogy now, thinking in your own streetcorner
There is nothing inherently wrong with marking assets on market value. Its actually the way of a free market mechanism as bad risks are being dealt with immediately and healthy risks being rewarded.
But, having said that, its true that this was necessary to get a breather as the entire economic system was under pressure because of the non transparant derivatives trade that was breaking the system apart.
The real problem was easy credit by enlarge due to FED policies.
Government involvement is the real problem. They appoint the FED and use their influence to cuddle the voter with pork spending.
Ron Paul for President