TWO DEGREES OF SEPERATION

We're back.  Great trip, great fun.  Gone fishin' next week but in the mean time...

Way back in the last century, I was testifying before a House sub-committee on sovereign debt which had as one of its brighest members a young congressman from Brooklyn by the name of Charles "call me Chuck"...and I did... Schumer .  Some where between then and now Chuck either ran into a pole trying to get in front of a tv camera or took a stupid pill, but that's another story.  In those days he was really on top of things and the subject about which I was testifying was the valuation of sovereign debt that American banks held on their balance sheets...to wit, should "mark to market" apply.  Two guys from Noo Yawk really mixing it up.

"Why shouldn't we demand to know the real value of this stuff?"

"Because Congressman, the value of a loan is a subjective thing; a very subjective thing."

"Isn't there a market?"

"Yes, but it's not very deep or well-established and as such easily manipulated."

"You're not serious."  (I was but I knew that he knew that I knew the real concern was that if we had had to put a mark on that crap AT THAT POINT IN TIME, half the banks in the U.S. would be insolvent).

"Look Congressman, let me put it this way, there are a lot of intangibles regarding the valuation of a particular credit.  Take my credit for example..."

"What intangibles..."

"My wife."  A Pause.

"You have one of those too, eh?"  (General laughter).

"Sure as hell do."

After the hearing was over he approached me and asked if he could call from time to time...no attribution, totally off the record.  He did ring a number of times and fully understood the problem as well as the enormous loss of flexibility not just for the banks but for the regulators as well.  He never broke the confidence.  I'm going to be interested to see where Chuck comes down on this insanity being proposed by the FASB loonies, the earlier version of which damn near tanked the world 18 months ago. Do these people never learn or is everybody these days simply consumed with their own sense of importance and insatiable thirst for authority?  Consult the archives of the blog to see what I mean.

All of this comes about without a single nod to the reality that we have this country called Greece which has been in the news as of late.  Forget about the fact that the "bailout" is a total charade, that it is stupid, that there should have been a rescheduling on market terms, that as an attempt to save the Euro it might well have been the final nail in the coffin and that the real reason was to save the hides of the French and German banks which will be all for naught if this proposal is adopted on a world-wide basis which is really the only way it can be adopted.  Sure as God made Green apples The Suit and his collection of hooples will be all for it on the basis that it provides "transparency,"  and when the music stops, which I predict will be inside of six months, there are going to be a lot of "Peoples," as my friend Hans would put it, "looking where to for to sit down."  Tomorrow, I'll try to spell out the end game if the players allow it to be played.  Stay tuned.