Solve It: We Don't Need a Bailout...And Never Did!

All we need to do is roll back the FAS 157 “Mark to Market” valuation rule from November 2007!

The last presidential debate between Obama and McCain left me with the feeling that neither of these candidates is very presidential! We have a financial crisis in full bloom. The stock market will continue to slide until the credit crisis is resolved…today’s businesses need credit to function and the market is recognizing that fact. Yet neither of our candidates has presented any creative ideas for solution. Neither even mentioned our most pressing issue in their lackluster performances.

Perhaps it’s time for citizens to begin offering solutions.

Ever wonder how Paulson came up with $700B and if that’s enough (it’s not if we stay on the current track)? Ever wonder why the bailout bill that was passed said that the money would be used to purchase mortgage-backed security assets from the banks…and why that hasn’t been done? Ever wonder why the $700B is instead being used to purchase equity in just nine banks…and if we are now the the majority stockholders of those nine banks are they really just one new bank…and why would this new bank make loans to banks that didn’t get an equity injection? And how does either buying the assets of, or investing in banks address the issue of the damaged banking assets (they don’t)?

I too began wondering and decided to do some research. The results are in the following four video segments I posted on YouTube that cover: 1) A way to think about and model the behavior of banks that can be used to evaluate “rescue” scenarios; and then using that model, 2) How we got into this mess, 3) The $700B bailout option(s) and why they won’t work, and 4) A rescue scenario that I call “Back to the Future” that rolls back “mark to market” asset valuation that can solve the financial crisis without spending a dime!

These videos are in their first unedited release. I targeted a few individuals in advance and have received some feedback; I would appreciate yours. When I have enough new material I will re-release the set. Please leave comments in the section below the last video or contact me directly at: If you want to reference this article in emails, you can do so with this link:

Banking System Flow Model:

How we got into this mess:

The $700B Bailout Scheme(s)…and why they won’t work:

Back to the Future,” Unwinding the Mark-to-Market Mistake:



Anonymous said...


1. Go back to the old Mark-to-Market rules and apply them only to assets held for trading.
a. Don’t expand to all assets, such as branch office buildings, mortgages, leases etc.
b. Don’t mark liabilities to market as it is counter-intuitive.
2. Stop allowing naked shorts. It is currently against the law, but it appears that the regulators haven’t figured a way to detect abuses.
3. Holders of 5% of a public company have to file with the SEC. Level the playing field by having firms that short 5% of a company, file with the SEC.
4. The Government has purchased assets in AIG, Fannie, Freddie and some banks. Syndicate this fund and let investors buy some shares.
5. Put the up-tick rule back in effect.

HarleyDave said...


All good ideas. You’ve given this some thought.