Thursday, October 2, 2008

Don't Vote for the Bailout

Upon the SEC’s announcement that they will allow banks to relax their mark to market accounting standards, the Dow is up 485.2 and the S&P up 58.3, it’s biggest one day rise in six years.

And LIBOR, the international rate at which banks are willing to lend to each other, is way down. According to Barrons:

Overnight LIBOR rates have fallen more than 300 basis points, taking the rate to about 3.8%. … Abetting the new-found willingness of banks to lend to other banks, of course, has been the concerted effort on the part of the central banking infrastructure around the globe to effectively flood the financial capitals with dollars.

Don’t expect Wall Street or the Hill to acknowledge these glad tidings–they probably attribute the upswings to their upcoming lousy Bailout votes.

On a related note: notice that a change to the accounting standards is being accomplished under intense political pressure. The accounting standard for mark-to-market was designed to create greater transparency on the books of financial institutions (among others). With the repeal of this standard (I mean "relaxing"), financial institutions now have political cover for systematically misleading shareholders: Republicans as free market mavericks? I don't think so.

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