Comments on: Beyond mark to market

By: jcmccutcheon

jcmccutcheon — Thu, 20 Aug 2009 13:53:28 +0000

Warren, so how does this effect the analysis of the causes of the credit crunch. Was it more of a pro-cyclical (as u have said) ‘demand’ for loans problem or was it more of a under-capitalization ‘supply’ problem?

By: Warren Mosler

Warren Mosler — Thu, 20 Aug 2009 11:24:53 +0000

they use the higher one

By: Warren Mosler

Warren Mosler — Thu, 20 Aug 2009 11:24:15 +0000

i’ve seen it and just had my bank’s capital ratios reduced by it.

By: Zaid

Zaid — Thu, 20 Aug 2009 06:01:01 +0000

The FDIC has also been raising premiums on all risk categories… same old “FDIC is out of money” nonsense!

Warren, forgive my ignorance, what happens when one rating agency rates a security as investment grade and another doesn’t? Do the regulators decide which rating to use for capital ratio requirements?

By: Captain CraZ

Captain CraZ — Thu, 20 Aug 2009 04:01:05 +0000

Winterspeak, the rube goldberg machine of our government keeps many human beings busy and occupied. Sure it is total inefficient madness when viewing the whole forest. I have not heard Warren address the point that perhaps the “public purpose” of full employment has created so many rube goldberg machinations, that the only way to keep full employment, is to hire people to create and others to destroy various government public purpose entities! Like keynes analogy, hire half the people to bury jars of money, and the other half to dig up the jars of money. It keeps everyone working, but they aren’t really accomplishing much or bringing us stargate atlantis cities.

I can’t help but remember several years ago talking to Warren about Hoover’s printing presses and the banks all not willing to lend and someone saying something about we wouldn’t make that mistake again. (sigh) Warren the tower of Babel grew so high, even many smart well meaning people could not keep it growing. Roman society got too complicated, from the political backstabbing to the complex social strata, the solution was for the simple barbarians to raze the city and start anew.

What founding father said FIRST by INFLATION, and then by DEFLATION, the sons of this country would wake up slaves owning nothing. Phil Grande philsgang.com says what they are doing with the banks is total nonsense, it is just allowing 300 rich wealthy families to come in and scoop up all these assets that were generated by this last inflation at firesale prices. It is up to people like YOU Warren to stop them from doing this, the wealth gap from rich to poor is already WAY TOO HIGH!

http://www.businessinsider.com/2008/4/income-gap-widens-recession-fears-grow

By: anon

anon — Thu, 20 Aug 2009 02:57:45 +0000

100 per cent capital requirement for something that’s already been marked to market?

Very doubtful. I’ll believe it when I see it.

By: winterspeak

winterspeak — Wed, 19 Aug 2009 22:34:49 +0000

It’s insane.

The give out money with one hand, and drain it (via FDIC) with the other.

They loosen capital ratios and let banks recapitalize with one hand, and tighten capital ratios with the other.

The roulette wheel is really going round and round. Thank God for unemployment!

By: Warren Mosler

Warren Mosler — Wed, 19 Aug 2009 21:10:01 +0000

yes, they go to prices where unleveraged buyers will buy them, which is fine, if there isn’t a lot of sudden selling

By: Jim Baird

Jim Baird — Wed, 19 Aug 2009 20:13:42 +0000

And I guess since most of the entities who would normally buy them are also under the same constraints, it might be difficult to unload them, anyway?

By: warren mosler

warren mosler — Wed, 19 Aug 2009 19:17:51 +0000

if they aren’t investment grade you can’t buy them in the first place.

so let’s say you bought them when they were investment grade, and then they are downgraded. they now are valued at 0 for purposes of determining capital ratios, even if market value is still solidly positive.