When World News Trust: Krugman Is Correct But Has Wrong Conclusion (William Chirolas)

[Tace]

To ask bank shareholders to take a greater hit so that bottom feeders can profit from a suspension of classic good accounting for held-to-maturity assets is nonsense.

William Chirolas -- World News Trust

Jan. 21, 2009 -- Paul Krugman, in a New York Times column Monday, entitled "Wall Street Voodoo," states his conclusion that our banks are walking dead and that the shareholder investments in those banks should be wiped out so as to reflect the current values on offer for "toxic assets" (derivatives that are tranches of aggregated mortgages).

It is hard to disagree with Krugman because he always gets his facts correct, but in this case his conclusion is not one I share.

There is indeed no current working market for those "toxic assets," and while certain bottom feeders are offering silly prices for the investments, those prices are "the market" only if the concept of "held to maturity" is now dead along with a death of the need of pricing cash flows to a rate of return that is "market.

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http://www.worldnewstrust.com/wnt-reports/commentary/when-krugman-is-correct-but-has-wrong-conclusion-william-chirolas.html

[depakid]

1. People tend to confuse "illiquid" or "hard to value" with "worthless"

That said, I still think Krugman has the right idea- set up an RTC like entity and deal with this once and for all.

Doesn't make any sense to keep trying to plug up holes in the dyke.