One of the four parts of my plan for the financial markets – and arguably the most important one – has become the new policy of the Securities and Exchange Commission (Washington Post via NRO - The Corner):
The Securities and Exchange Commission and the Financial Accounting Standards Board have just made an announcement that, dry as it sounds, may mean a great deal: “When an active market for a security does not exist, the use of management estimates that incorporate current market participant expectations of future cash flows, and include appropriate risk premiums, is acceptable.”
Translated into English, mark-to-market is effectively gone. Now firms with badly undervalued mortgage-backed securities don’t have to undervalue them anymore (inevitable 2008 campaign digression: John McCain is noting that he “called for a meeting of accounting professionals to discuss whether mark-to-market accounting was magnifying problems in the financial markets” – The Corner).
I have no idea whether this was related to the bailout being shot down, but I’m guessing it was. If I’m right (huge “if” there), then the 228 Congressmen who voted the Bush-Obama-Paulson-Pelosi plan down did their country an immeasurable service.
If I’m wrong, this is still a fantastic move that can go a long way to pulling the financial markets out of the hole they’re in.
Now, we need to bring more capital into the markets by repealing Sarbanes-Oxley and cutting the capital-gains and corporate taxe rates – in other words, the rest of my plan.