The Economy, stupid

[Balta1701]

It makes a big difference, because it is the write downs that are killing the banks right now. If they weren't writing down assets, we wouldn't have a probelm. Even if they aren't what you judge them to be, they are murdering the capital ratios of banks and making money just disappear from the system. Speaking as someone who actually deals with securities valuations on an everyday basis, its also worth noting that just because there isn't someone who is willing to pay a price for something, doesn't mean that is not what they are worth. Exchanges give valuations to all kinds of things all of the time which aren't based on trades. Heck I would estimate something like 95% of all exchanged based options contracts are settled on a nominal value, and not a traded actual value at the end of the day. Valuing these securities at something other than a traded price is the overwealming common practice.

But is it not true that the thing that is forcing the banks to write down these assets is the fact that they're losing money on the investment in the first place? You and I both seem to be agreeing that the mortgage and other debt-backed assets are simply worth less than what the banks are accounting them as right now, as you said, no one will buy up something if they think they'll lose money on the deal. You seem to be taking a position that makes no sense to me; these things are worth less than the banks are saying they're worth, so we should allow the banks to pretend they're worth even more so that the banks don't have to take the write-downs, thus improving the condition of the banks' books. The only way that allowing the banks to pretend these assets are worth even more will help is if the assets really aren't as bad as everyone thinks they are.

 

I don't know if I need to point out the numbers again but I'll do so. 1/5 of American homeowners are now under water, at the point where they owe more on their mortgage than their home is worth. 1/8 homeowners are either behind on their mortgage or are somewhere in the foreclosure process. And the Housing Market still has a ways to go. I posted the other day that AAA rated assets made up of mortgage backed securities from 2006 and 2007 were returning $.05 on a $1 investment. These assets are simply garbage. There is no other way around it.

 

There's a reason why these assets are treated by everyone other than the Fed as worth less than what the books of the banks say they're worth. Because they're already bad, there's every reason to believe they're going to get worse, and no one wants to be the one caught holding them when the free money trains from the government run out.

[kapkomet]

It makes a big difference, because it is the write downs that are killing the banks right now. If they weren't writing down assets, we wouldn't have a probelm. Even if they aren't what you judge them to be, they are murdering the capital ratios of banks and making money just disappear from the system. Speaking as someone who actually deals with securities valuations on an everyday basis, its also worth noting that just because there isn't someone who is willing to pay a price for something, doesn't mean that is not what they are worth. Exchanges give valuations to all kinds of things all of the time which aren't based on trades. Heck I would estimate something like 95% of all exchanged based options contracts are settled on a nominal value, and not a traded actual value at the end of the day. Valuing these securities at something other than a traded price is the overwealming common practice.

You are warming up to what I'm going to go through on the mark-to-market post.

 

I'm going to explain it from an accounting perspective and why in a large way that is NOT to blame for all of this.

 

Again, it's very complex... a lot of professional accounting people disagree on the application of the FASB.

[southsider2k5]

But is it not true that the thing that is forcing the banks to write down these assets is the fact that they're losing money on the investment in the first place? You and I both seem to be agreeing that the mortgage and other debt-backed assets are simply worth less than what the banks are accounting them as right now, as you said, no one will buy up something if they think they'll lose money on the deal. You seem to be taking a position that makes no sense to me; these things are worth less than the banks are saying they're worth, so we should allow the banks to pretend they're worth even more so that the banks don't have to take the write-downs, thus improving the condition of the banks' books. The only way that allowing the banks to pretend these assets are worth even more will help is if the assets really aren't as bad as everyone thinks they are.

 

I don't know if I need to point out the numbers again but I'll do so. 1/5 of American homeowners are now under water, at the point where they owe more on their mortgage than their home is worth. 1/8 homeowners are either behind on their mortgage or are somewhere in the foreclosure process. And the Housing Market still has a ways to go. I posted the other day that AAA rated assets made up of mortgage backed securities from 2006 and 2007 were returning $.05 on a $1 investment. These assets are simply garbage. There is no other way around it.

 

There's a reason why these assets are treated by everyone other than the Fed as worth less than what the books of the banks say they're worth. Because they're already bad, there's every reason to believe they're going to get worse, and no one wants to be the one caught holding them when the free money trains from the government run out.

 

Actually I think we are saying two completely different things. I am saying you don't have to have a trade to have proper valuation take place. Forcing the market to recognize prices that probably don't refect reality, and making banks fail for that is just dumb policy, especially when it is forcing us into a gynormus debt situation and ruining the economy. The private sector recognizes how randomly these valuations are taking place and wants nothing to do with them. That is a rational market decision. You can't really tell me that you believe the actual market value of mortgages from two/three years ago is less than 5% of what they were worth then, yet we are supposed to assign those values to banks?

[Balta1701]

Actually I think we are saying two completely different things. I am saying you don't have to have a trade to have proper valuation take place. Forcing the market to recognize prices that probably don't refect reality, and making banks fail for that is just dumb policy, especially when it is forcing us into a gynormus debt situation and ruining the economy. The private sector recognizes how randomly these valuations are taking place and wants nothing to do with them. That is a rational market decision. You can't really tell me that you believe the actual market value of mortgages from two/three years ago is less than 5% of what they were worth then, yet we are supposed to assign those values to banks?

Ok, so basically, to first order you're adopting the Treasury/Fed position that these assets are going to be worth more in the long run than they are now and the banks are being forced to underwrite them because no one else wants to risk holding them right now. I'm taking the position that $8 trillion + of wealth has vanished and these securities are still over-valued, to the point where having a genuine value placed on them would send the banks in to bankruptcy.

 

If you're right, then TARP is a hell of a deal for the taxpayers and for the Fed, as is the nationalization of the GSE's, and there will be an end to this if we buy time by continuing what we're currently doing. If I'm right, then the only end to this is to have the government take the losses and break the banks apart in to entities that are no longer too big to fail. I'll leave it at that. Good discussion.

[southsider2k5]

Ok, so basically, to first order you're adopting the Treasury/Fed position that these assets are going to be worth more in the long run than they are now and the banks are being forced to underwrite them because no one else wants to risk holding them right now. I'm taking the position that $8 trillion + of wealth has vanished and these securities are still over-valued, to the point where having a genuine value placed on them would send the banks in to bankruptcy.

 

If you're right, then TARP is a hell of a deal for the taxpayers and for the Fed, as is the nationalization of the GSE's, and there will be an end to this if we buy time by continuing what we're currently doing. If I'm right, then the only end to this is to have the government take the losses and break the banks apart in to entities that are no longer too big to fail. I'll leave it at that. Good discussion.

 

When the underlying pieces of a products are still worth 50-75% of the original cost of the asset, the proper valuation of the whole is not 5% of original cost. The proper valuation should be an aggregate of the pieces of the whole. Even though there isn't a market place for these things anymore, there is still the easy underlying asset to judge proper value on. These aren't binary options. There are still real, tangible assets making up these products.

 

I agree about the too big to fail part, except the agencies that I want to see broken apart are the agencies who started giving inflated valuations to these commodities in the first place in Freddie and Fannie.

[southsider2k5]

Speaking of mark to market, here is a great article from someone I actually worked with back in the day.

http://www.cnbc.com/id/29549920

 

UPDATE: Stocks Could Skyrocket After March 12th

Posted By: Lee Brodie

Topics:Stock Market | Stock Picks

Sectors:Financial Services

 

Investors such as Jon Najarian are hopeful that stocks could soar next week. They say we could see an explosion to the upside after a meeting scheduled for March 12th.

 

On that date, a House financial services subcommittee plans a hearing on mark-to-market accounting rules, which have been blamed for forcing banks to report billions of dollars in write-downs.

 

Karen Finerman has long been an advocate of putting these rules on hiatus for a while and “letting the banks breathe.”

 

If that meeting results in the government relaxing mark-to-market rules, optionMonster Jon Najarian thinks the stock market could explode. On Wednesday he told us, “if the government relaxes mark-to-market for 12 to 18 months you could see financials move 100% in a matter of hours.”

 

And he went on to say, “In fact, I hope you’ll replay the soundbite because if the government relaxes mark-to-market accounting a number of banks stocks will be unbelievable values at these levels.”

 

U.S. industry groups have urged the SEC and FASB to significantly alter or suspend the accounting rule, saying it is undermining the government's multibillion-dollar effort to stabilize the financial sector.

 

Mark-to-market accounting requires assets to be valued at current market prices. Some banks say it forces them to mark down assets to artificially low prices in the current financial crisis, even when banks intend to hold the assets past the current reporting period.

 

What's the trade?

 

Jon Najarian suggests a higher risk play – he suggests long the Financial Bull 3x ETF [FAS 2.79 0.15 (+5.68%) ] which is triple long ahead of the mark-to-market hearing.

[kapkomet]

When the underlying pieces of a products are still worth 50-75% of the original cost of the asset, the proper valuation of the whole is not 5% of original cost. The proper valuation should be an aggregate of the pieces of the whole. Even though there isn't a market place for these things anymore, there is still the easy underlying asset to judge proper value on. These aren't binary options. There are still real, tangible assets making up these products.

 

I agree about the too big to fail part, except the agencies that I want to see broken apart are the agencies who started giving inflated valuations to these commodities in the first place in Freddie and Fannie.

Ding. Winner.

 

 

[Balta1701]

Some new data backing up my case that the banks problems aren't related to the fact that they're not allowed to pretend their mortgage backed securities are worth more than anyone would reasonably pay for them. The problem is they're way, way over-exposed to risk on every side.

America's five largest banks, which already have received $145 billion in taxpayer bailout dollars, still face potentially catastrophic losses from exotic investments if economic conditions substantially worsen, their latest financial reports show.

 

Citibank, Bank of America, HSBC Bank USA, Wells Fargo Bank and J.P. Morgan Chase reported that their "current" net loss risks from derivatives — insurance-like bets tied to a loan or other underlying asset — surged to $587 billion as of Dec. 31. Buried in end-of-the-year regulatory reports that McClatchy has reviewed, the figures reflect a jump of 49 percent in just 90 days.

 

The disclosures underscore the challenges that the banks face as they struggle to navigate through a deepening recession in which all types of loan defaults are soaring.

 

The banks' potentially huge losses, which could be contained if the economy quickly recovers, also shed new light on the hurdles that President Barack Obama's economic team must overcome to save institutions it deems too big to fail.

 

While the potential loss totals include risks reported by Wachovia Bank, which Wells Fargo agreed to acquire in October, they don't reflect another Pandora's Box: the impact of Bank of America's Jan. 1 acquisition of tottering investment bank Merrill Lynch, a major derivatives dealer.

 

Federal regulators portray the potential loss figures as worst-case. However, the risks of these off-balance sheet investments, once thought minimal, have risen sharply as the U.S. has fallen into the steepest economic downturn since World War II, and the big banks' share prices have plummeted to unimaginable lows.

...

 

These instruments, he wrote, "have made it almost impossible for investors to understand and analyze our largest commercial banks and investment banks . . . When I read the pages of 'disclosure' in (annual reports) of companies that are entangled with these instruments, all I end up knowing is that I don't know what is going on in their portfolios. And then I reach for some aspirin."

 

Most of the banks declined to comment, but Bank of America spokeswoman Eloise Hale said: "We do not believe our derivative exposure is a threat to the bank's solvency."

 

While Bank of America advised shareholders that its risks from these instruments are no more $13.5 billion, Wachovia last year similarly said it could overcome major risks. In reporting a $707 million first-quarter loss, Wachovia acknowledged that it faced heavy subprime mortgage risks, but said it was "well positioned" with "strong capital and liquidity." Within months, losses mushroomed and Wachovia submitted to a takeover by Wells Fargo, which soon got $25 billion in federal bailout money.

...

 

In their reports, the banks said that their net current risks and potential future losses from derivatives surpass $1.2 trillion. The potential near-term losses of $587 billion easily exceed the banks' combined $497 billion in so-called "risk-based capital," the assets they hold in reserve for disaster scenarios.

 

Four of the banks' reserves already have been augmented by taxpayer bailout money, topped by Citibank — $50 billion — and Bank of America — $45 billion, plus a $100 billion loan guarantee.

 

The banks' quarterly financial reports show that as of Dec. 31:

 

_ J.P. Morgan had potential current derivatives losses of $241.2 billion, outstripping its $144 billion in reserves, and future exposure of $299 billion.

 

_ Citibank had potential current losses of $140.3 billion, exceeding its $108 billion in reserves, and future losses of $161.2 billion.

 

_ Bank of America reported $80.4 billion in current exposure, below its $122.4 billion reserve, but $218 billion in total exposure.

 

_ HSBC Bank USA had current potential losses of $62 billion, more than triple its reserves, and potential total exposure of $95 billion.

 

_ San Francisco-based Wells Fargo, which agreed to take over Charlotte-based Wachovia in October, reported current potential losses totaling nearly $64 billion, below the banks' combined reserves of $104 billion, but total future risks of about $109 billion.

 

Kopff, the bank shareholders' expert, said that several of the big banks' risks are so large that they are "dead men walking."

 

The banks' credit-default portfolios have gotten little scrutiny because they're off-the-books entries that are largely unregulated. However, government officials said in late February that federal examiners would review the top 19 banks' swap exposures in the coming weeks as part of "stress tests" to evaluate the institutions' ability to withstand further deterioration in the economy.

One thing I still wonder about is the exposure of these guys and of AIG to bankruptcy on the part of GM/Chrysler.

[kapkomet]

Some new data backing up my case that the banks problems aren't related to the fact that they're not allowed to pretend their mortgage backed securities are worth more than anyone would reasonably pay for them. The problem is they're way, way over-exposed to risk on every side.

One thing I still wonder about is the exposure of these guys and of AIG to bankruptcy on the part of GM/Chrysler.

I don't think anyone disagrees with you that they have a ton of risk on everthing right now.

 

However, the mark-to-market rules and the ESTABLISHMENT of a proper market is a lot of the problem. The fed was trying to establish a market for it, and that's failed... as to why I'm not sure because I haven't read enough on it yet. I do know that they are trying like hell to get a realistic handle on the market. That is very difficult because how do you value something that no one is sure what you will get out of it? With that said, if the government is going to back it, then the market should go higher, much higher in some cases, which would suggest that the banks have lowered certain assets too low.

 

 

 

[Balta1701]

I don't think anyone disagrees with you that they have a ton of risk on everthing right now.

 

However, the mark-to-market rules and the ESTABLISHMENT of a proper market is a lot of the problem. The fed was trying to establish a market for it, and that's failed... as to why I'm not sure because I haven't read enough on it yet. I do know that they are trying like hell to get a realistic handle on the market. That is very difficult because how do you value something that no one is sure what you will get out of it? With that said, if the government is going to back it, then the market should go higher, much higher in some cases, which would suggest that the banks have lowered certain assets too low.

The problem is, everyone knows that the government simply can only go so far backing these assets before people simply aren't going to want to bail them out any more. What %age of Citigroup do we own now?

 

I mean, just look at the numbers. Citigroup's total market value right now is what, about $10 billion? (Haven't done the math today, it was around that # on Friday). Look at the deal the Federal Government struck with Citi in November. Citigroup would take the first $29 billion in losses on their securities. For the next $272 billion, the losses would be split 90/10 with the government taking 90% of the losses. Out of their first $330 billion in losses, the Fed was going to absorb $245 billion. The U.S. government has guaranteed to take on $245 billion of Citigroup's losses, basically agreeing to pay Citigroup $245 billion, and their total value now has dragged itself below $10 billion. The only way that makes sense is if the markets currently think the losses Citi is going to take will overwhelm $245 billion from the government, since Citi supposedly has $108 billion in emergency reserves based on that report that I just posted.

 

The Federal Reserve has expanded its balance sheet by $2 trillion over the past year, buying up these assets. The Fed has guaranteed $245 billion in Citigroup's assets directly. And yet, the market still thinks that Citigroup is nearly worthless. The market certainly isn't always wise, but the numbers there are staggering. They're expecting Citigroup to be unable to cover $350 billion in losses.

[southsider2k5]

The problem is, everyone knows that the government simply can only go so far backing these assets before people simply aren't going to want to bail them out any more. What %age of Citigroup do we own now?

 

I mean, just look at the numbers. Citigroup's total market value right now is what, about $10 billion? (Haven't done the math today, it was around that # on Friday). Look at the deal the Federal Government struck with Citi in November. Citigroup would take the first $29 billion in losses on their securities. For the next $272 billion, the losses would be split 90/10 with the government taking 90% of the losses. Out of their first $330 billion in losses, the Fed was going to absorb $245 billion. The U.S. government has guaranteed to take on $245 billion of Citigroup's losses, basically agreeing to pay Citigroup $245 billion, and their total value now has dragged itself below $10 billion. The only way that makes sense is if the markets currently think the losses Citi is going to take will overwhelm $245 billion from the government, since Citi supposedly has $108 billion in emergency reserves based on that report that I just posted.

 

The Federal Reserve has expanded its balance sheet by $2 trillion over the past year, buying up these assets. The Fed has guaranteed $245 billion in Citigroup's assets directly. And yet, the market still thinks that Citigroup is nearly worthless. The market certainly isn't always wise, but the numbers there are staggering. They're expecting Citigroup to be unable to cover $350 billion in losses.

 

And why are they worthless? Because the people at the top keep saying that they are. None of this stuff will begin to solidify until the marketplace gets some confidence in the actions of the government. Right now they have no reason to believe things will be getting better anytime soon, because they keep getting told they won't.

[southsider2k5]

The problem is, everyone knows that the government simply can only go so far backing these assets before people simply aren't going to want to bail them out any more. What %age of Citigroup do we own now?

 

I mean, just look at the numbers. Citigroup's total market value right now is what, about $10 billion? (Haven't done the math today, it was around that # on Friday). Look at the deal the Federal Government struck with Citi in November. Citigroup would take the first $29 billion in losses on their securities. For the next $272 billion, the losses would be split 90/10 with the government taking 90% of the losses. Out of their first $330 billion in losses, the Fed was going to absorb $245 billion. The U.S. government has guaranteed to take on $245 billion of Citigroup's losses, basically agreeing to pay Citigroup $245 billion, and their total value now has dragged itself below $10 billion. The only way that makes sense is if the markets currently think the losses Citi is going to take will overwhelm $245 billion from the government, since Citi supposedly has $108 billion in emergency reserves based on that report that I just posted.

 

The Federal Reserve has expanded its balance sheet by $2 trillion over the past year, buying up these assets. The Fed has guaranteed $245 billion in Citigroup's assets directly. And yet, the market still thinks that Citigroup is nearly worthless. The market certainly isn't always wise, but the numbers there are staggering. They're expecting Citigroup to be unable to cover $350 billion in losses.

 

One more thing I didn't think of explaining last night, that you all probably don't know... market cap is the valuation of a company, simple enough, right? For a bank, its not.

 

Once again because of the ill-fitting accounting laws, a banks value isn't as simple as what their assets are worth plus or minus a forward valuation of earnings or loses. Because of the capital ratio laws of the Depression era banking changes, plus the genius of Sarbanes Oxley, a bank that has an 89% capital ratio, is worth the same thing as a 0% capital ratio, because they are both insolvent. Technically at under 90% the bank is taken over by the government, they charter is revoked, and their stock is cancelled. The numbers actually make sense. I tried to google assets under management for C, and found a number from the end of May that stated they had $1.8 trillion in assets under management. Which means they probably lent out something like 1.5 to 1.6 trillion dollars against it. Take losses of $350 billion in valuation write downs, and you are insolvent. This is write down of about 20% of total valuations. Citibank still has assets of about 1.4 to 1.5 trillion dollars under management, but is technically worthless and doesn't exist if the Fed weren't pumping up their books to keep them at that 90% ratio. They are worth $10 billion in market cap today because the market doesn't believe the Fed can keep pumping in money until their assets start to appreciate again. This is another perfect example of how easy it is to make numbers lie to people who don't understand them.

 

Realize that under your theory of an asset being worth what someone is immediately willing to pay for it, C would have gone under 6 months ago, even with government help, and we would have been on the hook for the majority of that 1.8 trillion dollars.

[NorthSideSox72]

A couple thoughts on this discussion...

 

1. If you stop MTM valuation, you have to replace it with something. What model or models are the people who want to stop it, suggesting we use to replace it?

 

2. The government would be smart to heavily back efforts to get clearing houses and organized exchanges online for fixed income and swap instruments. That is a big part of why these parties were able to trade into such high risk - there wasn't anything binding them into the consequence of each transaction on their risk profile.

 

[southsider2k5]

A couple thoughts on this discussion...

 

1. If you stop MTM valuation, you have to replace it with something. What model or models are the people who want to stop it, suggesting we use to replace it?

 

2. The government would be smart to heavily back efforts to get clearing houses and organized exchanges online for fixed income and swap instruments. That is a big part of why these parties were able to trade into such high risk - there wasn't anything binding them into the consequence of each transaction on their risk profile.

 

1.Dollar/cost averaging is the system that makes the most sense to me.

 

2.Rumor on the street is that the have been pushing the CME to get into this business. Don't know if that is true or not, or in what form it would be, but that's just what has been said.

[NorthSideSox72]

1.Dollar/cost averaging is the system that makes the most sense to me.

 

2.Rumor on the street is that the have been pushing the CME to get into this business. Don't know if that is true or not, or in what form it would be, but that's just what has been said.

I can confirm that #2 has been underway for a while, CME wants to do it. But I don't know if the feds are pushing the issue to get going faster, or if they are promising any sort of funding.

 

[southsider2k5]

I can confirm that #2 has been underway for a while, CME wants to do it. But I don't know if the feds are pushing the issue to get going faster, or if they are promising any sort of funding.

 

If the CME is interested, I am guessing the hold up is finding enough capital for marketmakers to be able to function with. I am surprised they haven't put something together for Globex yet, but at the sametime, how do you standardize a product like that? It would be interesting to see what their prod/dev team is doing with it.

[NorthSideSox72]

If the CME is interested, I am guessing the hold up is finding enough capital for marketmakers to be able to function with. I am surprised they haven't put something together for Globex yet, but at the sametime, how do you standardize a product like that? It would be interesting to see what their prod/dev team is doing with it.

You don't really standardize it, per se. You can set up swap condition templates, which can then be customized per contract. You create a matching engine for the parties to use to link up (some of these already exist). And then you have a clearing house for risk and capital/collateral validation and provision. Not quite the same as a true exchange/clearing house relationship, but close, and good enough to significantly handle counterparty risk. That would get a lot of people on board.

 

The follow up on this, of course, is that once you have clearing houses and venues established, you then set rules where if people decide to do OTC swaps, you heighten the reporting requirements, to expose the risk-takers as being just that.

 

[NorthSideSox72]

By the way, markets up big today, 4 to 5% on major indicies so far. Not sure if this is the beginning of a bounce or not - there seems to be increasing levels of noise that the market is oversold on irrational levels of fear (as I suggested recently). Could also just be a blip.

 

 

[kapkomet]

re: point #1, you go to historical cost. That is what the rest of accounting is based on.

 

The problem is, you don't really know what the true historical cost of these assets really are. I would expect some guidance from FASB on this if they do suspend MTM.

 

 

[kapkomet]

By the way, markets up big today, 4 to 5% on major indicies so far. Not sure if this is the beginning of a bounce or not - there seems to be increasing levels of noise that the market is oversold on irrational levels of fear (as I suggested recently). Could also just be a blip.

They are up because Citibank says they are operating at a profit for the first two months of the year.

 

Combine this with the MTM noise, we might have seen our bottom. I could use an extra $1K on my cashout before next week.

[StrangeSox]

By the way, markets up big today, 4 to 5% on major indicies so far. Not sure if this is the beginning of a bounce or not - there seems to be increasing levels of noise that the market is oversold on irrational levels of fear (as I suggested recently). Could also just be a blip.

 

As long as its not a dead cat bounce...

[southsider2k5]

As long as its not a dead cat bounce...

 

Sans some real fundemental change, I am sure it is.

[Cknolls]

By the way, markets up big today, 4 to 5% on major indicies so far. Not sure if this is the beginning of a bounce or not - there seems to be increasing levels of noise that the market is oversold on irrational levels of fear (as I suggested recently). Could also just be a blip.

 

 

What fear? The vix never got above 53.25. There is no fear in the mkt right now. The vix was trading at the 81-82 level on the Nov lows. And all they can muster with these lows is a 53.25 print. You can still get short without having to pay up for puts.

[Cknolls]

They are up because Citibank says they are operating at a profit for the first two months of the year.

 

Combine this with the MTM noise, we might have seen our bottom. I could use an extra $1K on my cashout before next week.

 

 

Bernanke is against rescinding MTM rules. It will be interesting to see what the committee does at Thurs. meeting. If they suspend rules there is huge dissention between the FED and the White House= NOT GOOD for mkts.

[southsider2k5]

Sans some real fundemental change, I am sure it is.

 

This could be it!!!

 

I wonder how much political willpower there is to change this?

 

http://www.bloomberg.com/apps/news?pid=206...&refer=home

 

Bernanke said the regulatory overhaul would smooth out the boom-and-bust cycles in financial markets.

 

“We should review regulatory policies and accounting rules to ensure that they do not induce excessive” swings in the financial system and economy, the central bank chief said today in remarks prepared for an address to the Council on Foreign Relations in Washington.