Add Two More Names to the List

Add two more names to the list of politicians we can blame for this bailout mess:  Senator Paul Sarbanes and Senator Mike Oxley.  Why?  Because these two "geniuses" gave us, in the aftermath of Enron, the Sarbanes-Oxley Act.

Yes, SARBOX was supposed to prevent this type of nonsense by making financial statements more accurately reflect the financial condition of the company.

Guess that horse has left the barn. Nice one, Paul and Mike.  Your stunning legislation did such a spectacular job.  Anyone wonder why I don't think this "bailout" will ultimately mean a damn thing?

SARBOX introduced the idea of "mark to market", which forces firms to mark to the lowest possible value their current assets.  This simple rule is what drove the credit markets into the sewer.  Why?  Because financial firms were marking down their assets to the lowest possible value the market would accept-- not necessarily the actual value of the asset itself.  For example, if a home worth $200,000 had a $500,000 mortgage that was going bad, the "value" of the asset (the mortgage) was marked down below the actual value of the structure.

Why?  Because that is the law.

Given that business generally get credit based on their current asset valuation, their ability to borrow for operations was dramatically undercut to the point where their cashflow went negative.  Bear Stearns, Countrywide, and Lehman were not technically "out of money", they just didn't have sufficient cashflow for operations.

When that happens, you have to close the doors.

SARBOX -- the great reform effort of the early 21st Century -- whas the match that lit the powder kegs being stacked by pure, outright corruption at Fannie Mae, Freddie Mac, et al.  Had SARBOX not existed, we would still have a problem -- but the problem would probably not be as large as it is right, forcing US taxpayers to use their hard earned tax-dollars to keep afloat millionaires who could not find their own asses with two hands a flashlight.

SARBOX was an absolute failure.  Don't believe me?  Well, look at Mayo Shattuck and Constellation Energy.  Apparently, some accounting firm somewhere did a pretty good job getting around SARBOX, because their financial reports -- by their own admission -- certainly do not reflect the value of the value company.  A nice little feat that Mayo Shattuck will now get paid $50 million for, as he built a company on the backs of ratepayers.  That money will keep Mrs. Shattuck in face lifts, tummy tucks, and boob jobs for a long time!

If Congress can bungle expansive regulation like SARBOX, how can we trust them -- many of them who were bribed by Fannie Mae, Freddie Mac, GoldmanSachs, et al -- to pass good bailout legislation.

My answer:  you can't trust these ratfuckers as far as they can throw a crueller during a committee brunch.

Because we certainly can't trust the judgement of Senator Paul Sarbanes and Mike Oxley.  Or any of the people that voted for this legislation.