October 9, 2008
Common sense should indicate why this rule should be suspended.
Proponents for this rule are short term traders and hedge fund speculators which wish to purchase assets at liquidation prices. These are the loud noise makers in the market place.
Opponents of this rule include the former Chaiman of the FDIC who has specifically stated that if this rule was in effect in the late 1980's and early 1990's that all money center banks would have been bankrupted-by an accounting rule. Other opponents are banks who understand the nuances and repercussions of the rule and know their everyday loan transactions.
This is not about transparency.....this is about forced sales of assets at distressed prices. There is a difference. Something is fundamentally wrong when a change in an accounting rule can turn otherwise cash flow positive companies into illiquid, bankrupt companies.
As a footnote the desire of the SEC to be "fair" to short sale speculators is strongly contributing to the destruction of values in the marketplace.
Thomas L. Knorr