FASB 157 gets “clarification”

The much maligned accounting principle of “mark to market” accounting has received an important clarification today from regulators at the SEC.

“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.” source

FASB 157 came about as a result of the Enron scandal and subsequent regulations contained in the onerous Sarbanes Oxley Act.

Hopefully this is a first step toward its full repeal.

It is important to note that the SEC is NOT saying that cooking the books is now an acceptable accounting practice. That would be the last thing that corporate America needs in order to restore public confidence. Transparency is necessary, and the SEC’s clarification will help investors to see a much truer picture of the financial health of the corporate balance sheet. Perhaps, after the debacles of Bear Stearns, Lehman, Merrill, Wachovia, Wamu, and AIG, the SEC sees this as a way of acknowledging that many of the weaker players and their related toxic assets have been identified and dealt with, and it’s time to protect the healthier players that remain.

It becomes crucial as the Treasury anticipates buying some $700 billion in mortgage-backed securities, and in effect, establishing a market price for illiquid assets. A direct consequence would be that the remaining banks would have to take a write down on their assets to reflect the new market price.

This is an important clarification from the SEC. It will have an important and immediate impact.

Another question for Obama

“Sen. Obama, you dismissed your association with William Ayers by stating that his actions, while “despicable”, occurred when you were just eight years old. Ayers was still a fugitive when another terrorist bomber, Ted Kaczynski (the “Unabomber”) began his bombing campaign (btw — Senator, you were 20 at the time). Would you have had any reservations working with Kaczynski? Would you have had any reservations launching your political career from Kaczynski’s home (prior to his apprehension)? What about from the home of abortion clinic bomber Eric Rudolf? If so, please explain your criteria for working with some terrorists but not others.”

read more from Peter Kirsanow

A question for Obama

“Senator Obama, you distinguished yourself from your Democratic rivals in the primary season as having better judgment because you opposed the war in Iraq in 2002. Knowing what we know now about Saddam Hussein from the independent Iraq Survey Group (Dulfer) Report — that he had the capability to produce chemical weapons within three to six months (and that his son, Uday Hussein, head of Fedayeen Saddam, was openly advocating the use of chemical weapons on U.S. troops), that he was skimming billions of dollars in the Oil-For-Food program and was interested in off-the-shelf nuclear weapons, that he was providing safe haven for terrorists, that he was training and financing suicide bombers, what do you think Iraq would be doing today if Saddam were alive and still in power?”

Read more Q&A from Kathryn Jean Lopez and Debra Burlingame at NRO.

Obama grant being probed

from Chicago Sun-Times

A $100,000 state grant for a botanic garden in Englewood that then-state Sen. Barack Obama awarded in 2001 to a group headed by a onetime campaign volunteer is now under investigation by the Illinois attorney general amid new questions, prompted by Chicago Sun-Times reports, about whether the money might have been misspent.

The garden was never built. And now state records obtained by the Sun-Times show $65,000 of the grant money went to the wife of Kenny B. Smith, the Obama 2000 congressional campaign volunteer who heads the Chicago Better Housing Association, which was in charge of the project for the blighted South Side neighborhood.

Smith wrote another $20,000 in grant-related checks to K.D. Contractors, a construction company that his wife, Karen D. Smith, created five months after work on the garden was supposed to have begun, records show. K.D. is no longer in business.

Although decried by Chicago mayor Bill Daley, McCain’s recent ad about Chicago machine-politics seems to be right on the mark.

All together now, look real surprised.

The President’s address to the nation

Text of Speech:

THE PRESIDENT: Good evening. This is an extraordinary period for America’s economy. Over the past few weeks, many Americans have felt anxiety about their finances and their future. I understand their worry and their frustration. We’ve seen triple-digit swings in the stock market. Major financial institutions have teetered on the edge of collapse, and some have failed. As uncertainty has grown, many banks have restricted lending. Credit markets have frozen. And families and businesses have found it harder to borrow money.

President George W. Bush addresses the nation from the East Room of the White House, Wednesday evening, Sept. 24, 2008, on the nation's financial crisis. President Bush has invited legislative leaders from the House and Senate, including both Presidential candidates, to a meeting Thursday at the White House to discuss a bipartisan plan to rescue the economy. White House photo by Eric Draper We’re in the midst of a serious financial crisis, and the federal government is responding with decisive action. We’ve boosted confidence in money market mutual funds, and acted to prevent major investors from intentionally driving down stocks for their own personal gain.

Most importantly, my administration is working with Congress to address the root cause behind much of the instability in our markets. Financial assets related to home mortgages have lost value during the housing decline. And the banks holding these assets have restricted credit. As a result, our entire economy is in danger. So I’ve proposed that the federal government reduce the risk posed by these troubled assets, and supply urgently-needed money so banks and other financial institutions can avoid collapse and resume lending.

This rescue effort is not aimed at preserving any individual company or industry — it is aimed at preserving America’s overall economy. It will help American consumers and businesses get credit to meet their daily needs and create jobs. And it will help send a signal to markets around the world that America’s financial system is back on track.

Continue reading

Dr. Jim Storer ousted as City Administrator

The Enterprise Journal is reporting that City Administrator, Jim Storer, was relieved of his duties tonight in a 3-2 vote of the McComb city board.

“Selectmen Wade Lamb, Bobby Maddox and E.C. Nobles in favor of Storer’s firing and Selectmen Johnson and Robert Earl Smith dissenting.

Selectmen in favor of Storer’s removal said after the meeting they felt Storer had failed to keep them in the loop regarding city business.”


read more at E-J

Bobby Maddox–don’t even think about putting up one of your campaign signs in my yard next time around.

This is a boneheaded move.

The people of McComb deserve better.

ex-AIG head rejects severance deal

Robert Wilumstad, the former CEO of insurer AIG said no to a $22 million dollar severance package that he was entitled to under the terms of his employment contract. After being ousted as a condition of the Federal takeover, Willumstad’s decision to reject the deal is a bright spot in an otherwise cloudy situation.

Willumstad didn’t take the money because his three-month tenure ended before he could unveil a turnaround strategy and because investors and employees had lost so much on AIG stock, said the person, who declined to be identified because the refusal hasn’t been announced yet. Willumstad informed AIG of his decision in an e-mail to new CEO Edward Liddy, the person said.

read more at Bloomberg