Hidden in the middle of a Wall Street Journal article on vulture investors is a small observation that suggests, perhaps unwittingly, that the Treasury might be on the eve of complicity in one of the largest cases of accounting fraud in recent memory.
Other opportunistic investors, though, say they likely will stick to the sidelines for now. They are skeptical that the government’s purchase of distressed assets will accurately establish what they are worth. So far, there have been few transactions, despite the desperation of banks to sell, because of disagreements over pricing. (Emphasis ours).
If the Treasury buys assets at inflated prices and that permits banks to mark-to-the-Treasury-model, well… you get the idea.
Vulture Funds Plan to Buy Assets Ahead of Bailout
Why is take a report moving/changing the name?
We have become Japan.
Those who don’t learn from history are condemned to repeat it.
~~ Carlos Santana
It’s a feature, not a bug.
How the hell is that accounting fraud? The accounting rules don’t make an exception for marking to market just because the buyer happens to not know value of what they’re purchasing. I always thought selling something for more than it was worth was called “profit”… not “fraud”…. But I guess the SEC has banned that now too.
Ep – good post. Another reason this bail out is so flawed and all the talk that Treas will turn a profit is bogus.
No one can value this crapola. Or any reasonable model says they are well below what treasury is going to purchase them at so why buy if the value (realized) could precipitously decline even after a vulture investor purchases.
Maybe TGP will buy – they seem to know what they are doing!
No one live-blogging the Citi call? Come on guys, no equal time for Vikramo Pandita?
Ep – good post. Another reason this bail out is so flawed and all the talk that Treas will turn a profit is bogus.
No one can value this crapola. Or any reasonable model says they are well below what treasury is going to purchase them at so why buy if the value (realized) could precipitously decline even after a vulture investor purchases.
Maybe TGP will buy – they seem to know what they are doing!
Where is ALL CAPS from WHARTON!!?? He could save us
@2 – I don’t remember that line in any of Santana’s songs but I do remember George Santayana saying something similar to what you wrote. Maybe Santana said that during one of his concerts.
@ 9 — OK, OK, you went to college
dicknozzle
Mark-to-Wonderland!
Again, why bother buying the assets?
Why not pump money into the institutions along the lines of Buffet’s infusion into GS? Perpetual callable equity at a premium rate and call price plus in the money warrants. That plus suspending mark-to-market on 2006 and 2007 RMBS for institutions that choose to hold the assets would make so much more sense, protect taxpayers, and stabilize the system.
@10 – they teach that in high school. How do I taste?
takeareport.com probably changing name so all it’s previous readers who’ve been blocked by their respective employers can start tuning in again
good luck, large!! i miss you…