Phil Bronstein–still a moron

Few have ever heard of Phil Bronstein, but I lived in San Francisco (basically a one newspaper town) for five years and for some of that time Mr. Bronstein was the editor of the Chronicle. He ran the paper into the ground and then blamed it on the business environment for newspapers, but then so did lots of other people during the newspaper crash of the last few years. The Chronicle led the witch hunt against Barry Bonds, but then many other news outlets (and very few fans, at the end of the day) worked themselves into hysterics over Bonds’s use of substances (which by all indications were perfectly legal and unbanned at the time he used them). And in another unremarkable occurrence, Bronstein failed upward and still works for Hearst Inc. All that is par for the course in America’s “journalism” industry.
But now this goateed douche is trying to do punditry. He’s writing about…well who cares, it’s garbage, if you really want to know you can read the Media Matters blog entry on it. Suffice to say that since Hearst Inc. also runs Oprah Magazine, the Chronicle will be able to burn cash (some $50 million a year) and allow its former editors to become columnists for some time before the old rag gets tossed into the dumpster where it belongs.

Freddie Mac's latest victim

Someone should have thought about the problems these insane government-backed financial leviathans like Fannie Mae and Freddie Mac would inflict on the economy the day the real estate market went south. Well, I thought about that stuff, but why would anyone listen to some blogger (along with as a lot of other people, many of them much smarter than myself, who were sounding the same kinds of warnings)?
But anyway here we are. Those GSEs pumped up the lavish but ultimately ridiculous real estate market of the last decade across the country. Now the crash is happening, and not only is the result a wave of foreclosures, but also severe financial strain at Fannie Mae and Freddie Mac–who are no longer “implicitly” backed by the federal government so much as explicitly now since last year’s government bailout.
So now the acting CFO at Freddie Mac has died by apparent suicide.
Gawker thinks it’s too early to conclude that this had anything to do with the company where David Kellermann had worked since around 1993.
Nobody knows yet if Kellerman bent to the stress of his job, or if something else was going on.”
Yeah, but someone will know what he was thinking soon?

Wall Street's toxic debt is based on intentional deception

The discussion about mark to market accounting is an interesting one, to business-minded individuals, and I’m sure that you heard much more sophisticated dissections of the issue from others. Suffice to say that the normal caveat about accounting applies here–that being that much more judgment is required of anyone making an accounting rule than outsiders would probably think.

But then, this mess with toxic debt (mortgage backed securities and “special investment vehicles”) known as SIVs and CDOs has moved beyond the normal purview of the accounting trade, and beyond normal financial analysis of markets.

The reason that accountants and accounting rule-making bodies are out of their depth is due to several causes–first, this type of debt is a new, finance-industry-driven type of security that the more (actuarially) conservative accounting profession does not have established tools to deal with. Second, accounting totals are based on principles and balancing totals–sometimes assets can be “fairly” valued on a balance sheet at considerably higher dollar figures than could possibly reflect underlying value (goodwill for example) and the higher valuation arrived at by a different methodology is not something that is likely to be slipped by any savvy market participant (regulators, on the other hand…).

Most important, probably, is the finance angle in all of this. If one were to mark securities to market value, the absence of a functioning market would be a bit of a hindrance to being able to do that accurately. Which is where we are now.

Debt-backed securities had been intentionally made into complex vehicles by financiers and banks in order to falsely inflate their value. Of course, that’s probably why the bizarre housing boom lasted as long as it did–as long as people looked at the inflated (but trading as such in the “market”) values of securities that the investment banks were carrying on their balance sheets (and ignored things like one of Bear Stearn’s hedge funds collapsing and then Bear Stearns itself collapsing in consecutive years) it seemed like all was well. Somehow these now-toxic securities were being rated as risky as Treasuries. Someone should look into the debt rating agencies’ role in all of this.