The First Step In Actually Fixing Something

Good news - one of the things I've been chanting about as part of the fix has apparently been implemented, according to Powerline:

As the economic crisis has deepened over the last several weeks, a number of knowledgeable people have told me that the simplest thing the government could do that would have a significant effect on the availability of credit is to ease the "mark to market" rule. A couple of hours ago, the SEC did just that.

Technically the SEC issued a clarification of the rule, to the effect that banks are not necessarily required to write assets down to the current market level. Rather, "[w]hen 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."

The mark to market accounting rule has been a significant cause of the drying up of credit. Currently, there is no market for a broad range of financial instruments that are backed by mortgage portfolios. Under the old version of the rule, banks had to value such assets at zero. That's not right; most of them ultimately will have value. But currently, given the uncertainties surrounding the subprime market and some of the instruments themselves, no one wants to buy them.

The effect of such asset write-downs is that the amount of money the bank is allowed to lend is reduced. Thus, the SEC's clarification to the rule should have the effect, in the immediate future, of freeing up a considerable amount of credit.

The real threat to the broader economy comes from the freeze-up of credit markets, not the fact that a few private institutions that gambled heavily on mortgage-backed securities may go broke. If revision of the mark to market rule has as much impact on credit markets as many have predicted, it may strengthen the resolve of those who think there are better solutions to the problems in our financial markets than a $700 billion bailout.

This is great! Now, if we could just have some tax cuts, dismantling of Fannie and Freddie, and the GOP's idea of insurance for bad debt, and we'll hopefully be in business. Let's get over this idea of a bailout and get some real work done!

By the way, the Senate is scheduled to vote on a revised package (the House version that just got shot down along with some tweaks) tomorrow evening. Here are the details:

How it will go down…There will be up to 6 roll call votes on the following items:

(1)Motion to concur on the House message, H.R. 2095, Rail Safety;
(2)a Dorgan amendment relating to H.R. 7081, the U.S. - India Nuclear agreement;
(3)a Bingaman amendment relating to H.R. 7081, the U.S. - India Nuclear agreement;
(4)passage of H.R. 7081, the U.S. - India Nuclear agreement;
(5)a Dodd amendment to H.R. 1424, relating to the bailout package; and
(6)passage of H.R. 1424, the bailout.

Get your fingers dialing:

202-224-3121.

From the little bit of information trickling out, there's some good in this version of the package, and potentially a lot of bad. For example, it sounds like there are some tax cuts in there, but there's also a mention of 'sweeteners', which means earmarks. The real problem is the time crunch. We don't even know what's in the bill yet, and they're scheduling just a few hours of debate on it. There could be provisions in there for Democrat favorites such as amnesty for illegal aliens, funding for ACORN or Planned Parenthood, or any number of other things that the Right will not find a pleasant surprise.

I suggest you contact your Senators and urge them NOT to support this bill until all the provisions are made known and can be fully debated. If they tell you it's an urgent matter that needs to be dealt with right away, then ask them why they waited two days from when the House did its vote. This might be something workable...but we need to understand what's involved before throwing support behind it. Again, we need to do something, but we need it to be the right thing.

Earlier this week we saw the House website shut down because of the volume of opposition e-mails to that version of the bailout. That's the only thing that the idiots in Washington understand, apparently, so let's overwhelm the system again.

Get calling!

There's my two cents.