Sign In
SHARE
The Rule That Reduced Banks to a Quivering Blob of Matter
Andrew Ross Sorkin's article about Steve Schwarzman and FAS 157 is the gift that keeps on giving. First Barry Ritholtz took a swipe, then Jack Ciesielski attacked it forensically from a professional accountant's point of view, and now Gari has taken the rabid I'm-not-an-accountant approach, which might not be as clean as Roger Ehrenberg's considered essay but is certainly more fun:
Now, you will point out that several of the banks that are taking hideous write-downs might properly be called mega-banks, strange and loathesome combinations of investment banks and commercial banks, which in the current market are looking a bit like that dog that got caught in the Fly's matter transporter...
If you want to be in the business of cooking up debt obligations, and you either wish to be bailed out if the process goes wrong, or financial stability demands that you be bailed out if the process goes wrong, then absolutely a horde of regulators should be crawling over your books at all hours. Absolutely some incredibly conservative leverage levels should be applied to your business. Absolutely your masters of the universe should be incredibly boring people in bad ties and spiritual affinities with Germans.
But hey, I'm not accountant.
What no one has bothered to point out, maybe because it's so obvious, is that Sorkin's entire article is basically Schwarzman talking his book. Schwarzman runs a private-equity shop, which buys up companies with a little bit of equity and a lot of bank debt. Right now, the banks can't extend new loans, because they've lost so much money as a result of writing down the old ones. So Schwarzman's bright idea is that maybe if they didn't need to write down the old loans, that would make it easier for him to get new ones. Good luck with that, Steve. You'll need it.
Update: James Mackintosh notes that Schwarzman seems to have done a complete U-turn on this issue.
Loading...
Thank you for registering as a Portfolio.com Insider. Your comment has been added.
Create Your Public Profile
- The Times' Rorshach Geithner Story
- Apr 27 2009 9:26AM EDT
- Sinking Animal Spirits
- Apr 27 2009 8:45AM EDT
- Counter-cyclical Urban Policy
- Apr 26 2009 10:00AM EDT
- Be Your Own Counterfeiter
- Apr 26 2009 9:36AM EDT
- Being Tim Geithner
- Apr 25 2009 12:37PM EDT
- Notes From a Press Conference Naif
- Apr 25 2009 9:41AM EDT
- What Good is the News?
- Apr 25 2009 8:32AM EDT
- Stressful Enough
- Apr 24 2009 2:29PM EDT
- Not Regretting the Pound
- Apr 24 2009 1:09PM EDT
- Introducing the New Ford Squeeze
- Apr 24 2009 9:47AM EDT
- Non-Economic Questions of the Day
- Apr 24 2009 9:12AM EDT
- The Stress Test Blind Alley
- Apr 24 2009 8:36AM EDT
- Happy Hour
- Apr 23 2009 9:40PM EDT
- Recovery Without Rebalancing
- Apr 23 2009 6:13PM EDT
- The Shape of Your Recession
- Apr 23 2009 5:11PM EDT
Archive
Categories
Links
- Email Ryan Avent
- Econospeak
- Financial Crookery
- The Epicurean Dealmaker
- Naked Capitalism
- Alphaville
- Marginal Revolution
- The Panelist
- FP Passport
- Overcoming Bias
- Andrew Leonard
- Barry Ritholtz
- Brad Setser
- Carbon Tax Center
- Calculated Risk
- Greg Mankiw
- Free Exchange
- Dean Baker
- Alexander Campbell
- Kash Mansori
- The Bayesian Heresy
- A Fistful of Euros
- John Quiggin
- Michael Mandel
- Lance Knobel
- Mark Thoma
- Dan Gross
- Curbed
- Streetsblog
- Chris Anderson
- Deal Journal
- MarketBeat
- DealBook
- DealBreaker
- Carl Bialik
- Michelle Leder
- Brad DeLong
- Ultimi Barbarorum
