The Daily Bail

To lie or not to lie.  That is the question.

This is a very difficult issue.  I've been reading and thinking about it for almost 12 months and I admit that it's not a slam dunk 'no' as I wish it were.  But it actually becomes less complicated for me when a Keynesian like McTeer advocates its removal.

Side note: On the 2nd video inside McTeer admits to buying Citigroup last fall at $15 per share.  How could the former President of the Dallas Federal Reserve be so blind as to not realize the end game for Citi., you wonder?  Firstly, because he's a failed Keynesian who believes in miracles.  And secondly, it's a perfect demonstration that even former Fed Presidents don't do their homework, and, more damningly, don't understand the extent of the problems at some of our banks.  I say it all the time, but I can show you tens of thousands of people who have known since at least last Spring that Citi would eventually find a home in the land of nada, home of the zeros.  Why were we so smart?  Because we read every single piece of research out there both positive and negative, and we don't subscribe to the investment philosophy of hopes, dreams and sugar-coated rainbows.

Back to the point.  By nature, I am vehemently opposed to any suspension of reality.  That's pretty much how we got into this mess in the first place.  All the players packed on the leverage year after year, all of them convinced they could safely unload assets worth 35 times their capital base at or near par as soon as the music stopped.  Trillions in assets.

Did no one stop to consider that every investment bank was dancing the same death waltz?

Just who the hell did they think they were going sell to, when all the natural buyers for securitized assets would also be looking to sell?

The answer is that no one was thinking.  Reality had been suspended back in 2001 by reprobate Alan Greenspan when he dropped rates to 1% in an attempt to re-inflate the punctured technology bubble.  The same irrational exuberance that he feared back in 1996, he was now stoking mightily to keep the embers hot.  It worked for about 5 years, and then one day it didn't.

The winners were the bankers with in excess of $100 billion in bonuses paid on ficticious profits in a very short span.   And the losers are now you, the American taxpayers who are being asked to clean up the banker party at a cost of trillions.  There's $1.2 trillion of Citigroup vomit in that corner.  Over on your left, please ignore the $500 billion in Fannie and Freddie trash left lying around.  And to your right, see that drunk, disgusting passed-out fucker, Cassano from AIG.  He was doing shots of tequila until 4 am with the bankers from Barclays, Deutsche Bank, UBS and Goldman.  Ken Griffith and his Citadel punks left early this morning and took all the remaining booze with them, so you can't even have a drink while you clean up.

How did all this happen.  Suspension Of Reality.

And now the players want to do it again, only officially this time.  I don't see how it will help except to gut one of the most important principles in valuing assets.  Truth about price.

Do we really want to change the rules so that these characters can start dancing again?  It would be much simpler to simply allow certain banks forbearance on their current regulatory capital requirements.  It could be done most effectively on a case-by-case basis.

I admit it's a very nuanced issue.  Convince me in comments that I'm wrong but I'm sticking with guns Cabrera on this one.  Might as well give her the shout-out she deserves.  Excellent work the last 12 months on behalf of taxpayers, Michelle.  It has not gone un-noticed.

Chanos had some great insight into mark to market yesterday.  Take a look.

Update on Friday, March 6, 2009 at 1:18PM by DailyBail

updated with additional commentary and the 2nd video