Les Tricoteuses, from Jeff Watson

September 30, 2008 |

Tricoteuse Listening to the mainstream media, with all of the hyperbole, could cause one to think that the sky is falling. Partisan bickering, grandstanding, and strong invective by our elected officials has spilled over to the already roiled markets, especially since we're so close to the election. More than a few of my mystic, non-thinking acquaintances have been advocating revolution, with Capitalism being replaced by a kinder, gentler Socialist system. Their true desire is to punish the evil greedy speculators, hold all the rascals accountable, who with the minority party have decided to ruin this great country. Their anger is palpable, and their ultimate dream is to become a tricoteuse. Theirs is only a dream, as sitting at the guillotine would require courage.

Misan Thrope is incredulous:

Didn't Lehman, Washington Mutual, Wachovia, AIG, Freddie, Fannie, Merrill Lynch and Bear Stearns just go down the tubes? Or is it a figment of the MSM's imagination? Might not [insert your favorite name here] get in trouble next if nothing is done?

Stefan Jovanovich explains:

The hyperbole is in the argument that but for the bailout payroll-checks will bounce. I did a Google search, and I could not find a news article about a single company that had been unable to make its payroll because the Federal government had failed to reflate the real estate asset-backed securities market. The connections between the "financial system" and the actual private business being done in the country may once have been real, but they are now largely a fiction. Small businesses that I know operate on a cash basis and don't need/aren't granted bank loans nowadays.

Eastsider concurs:

I think we're seeing a classic availability heuristic bias in the public analysis. The clients of DC looter-lawyers need the bailout, and engineer hysterical media coverage of the problems. The press is now just a firehose of bull____, drowning out all competing viewpoints.

It's a tired cliche to say we're racing toward the world Orwell and Rand forecast, but that analysis seems increasingly, depressingly, apt.

Laurel Kenner adds:

The American Enterprise Institute, W. Isaacs and others fingered the so-called "Fair Value Accounting" rule as a post-Enron creation run amok, a major cause of the credit freeze.

Up until tonight, the SEC said no, the rule just reveals what lousy investments the firms had made. They just announced sensible modifications to the rule.

I can only wonder what can the SEC possibly say to the seven major U.S. firms that have fallen because of this rule? Sorry, we were a little too enthusiastic… too bad about you.

In any case, I'm sure the new Tricots will love this one.

It seems we are in agreement, when Clive Burlin intervenes:

Ms. Kenner, that you, of all people, would say that! The whole issue of FASB Statement 157 is a total waste of time; from start to finish.

George Parkanyi ponders:

The news about Fair Value Accounting is interesting, especially to see to what extent it moves the log-jam in the credit system.

With foreign aid, sometimes you can have nasty unintended consequences. For example, when food aid is distributed for free for too long, local agriculture (and self-sufficiency) can crash because the farmers can’t compete with the free food.

In observing the behaviour of LIBOR lately, one wonders if institutions are simply waiting for the government (the patsy) to sell to at relatively inflated prices rather put in the effort to value the securities and try to trade with each other? Could the government’s presence actually be detrimental to a resolution?

An Anonymous Contributor Adds:

While I am not an accountant, I believe both type of "Guidance" ("active market" and "distressed sales") just raises the hierarchy of guiding to a higher level. (Could someone enlighten me if I am wrong). I believe FAS 157 pamphlets originally used both these cases as examples of when to use "intrinsic value" versus "market values". What is really new?

Because "active markets" and "distressed sales" are both judgement calls, rather than defined terms, good luck getting your auditor to sign off on them. They remember Arthur Andersen too well and seem sure that there are no penalties for being too strict on interpretation, but get busted for being too liberal.

SEC seem to be taking the stance that "some accounting mistakes were made, but not by me". So they are willing to sell their brother to save themselves. Perhaps as close to an admission of guilt as you can expect to get from a government regulator.

Comments

4 Comments so far

Russell Pierce on September 30, 2008 7:47 pm
As a now retired 25-year owner of a historic knitting yarn mill, my attention was caught by "tricoteuse." In my experience, whenever there was a slowdown in business activity or a major tragedy in the news, our customers always seemed to knit more furiously. "Black clouds" were good for our business. We enjoyed one of our best business quarters following 9/11, as knitters first watched their TVs while knitting, then felt drawn closer to their loved ones under the threat of terrorism, so shared knitted gifts made with their own hands. I would predict another very good year-end quarter as the MSM promulgate fears of an impending crash or Great Depression. But please explain why the MSM haven't identified fully the web of current and past executives of Goldman Sachs in this current credit mess. It would seem that "What's good for Goldman's alumni, is good for the country", to paraphrase Charles E. Wilson.
Frank Linet on September 30, 2008 9:34 pm
Le Mot Juste? just another yarn? knitters knit!, fiddlers fiddle! SPECULATORS SPEC! AHH THAT OLD ENNUI OR ODE TO MS PLATH? VIC AND LAUREL ONCE COMMENTED THAT THE AVG I.Q. ON THE SPEC LIST WAS 125 PERHAPS 130, THOU DOES PROTEST NOT NEARLY ENUF. SURELY YOUR JOKING MR FEYNMAN? THE MSM!! THE MSM?? TURN OFF THE MSM OR DEFINE THE MSM BUT IF THE MSM PROMULGATE F E A R WHO PROMULGATES L O A T H I N G??
Anton on October 1, 2008 8:41 am
Portions of Fair Value Accounting truly are distorting and damaging. It is ludicrous to mark-to-market short term fluctuations in price on assets likely held to maturity. To understand what corporations are up against, ponder what would happen if a lender demanded a higher collateral payment, to maintain original LTV, if a borrower’s original purchase price is below the price that a neighbors’ similar home sells for in a distressed sale.
rob didomenico on October 1, 2008 1:14 pm
if these assets are likely to be held to maturity, then why does everyone want to dump them so badly? If they are worth so much, where are the vultures and super investors willing to take them and get the great returns they are supposed to provide "over time"?

Something is worth what someone is willing to pay for it …It's that simple. Press the reset button and start over already.

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