Wednesday, July 30, 2008

Merrill CDO worth less than 22 cents on the Dollar

Merrill CDO worth less than 22 cents on the Dollar

When Merrill sold the 22 cents on the dollar, shills (so called analysts) started calling this the bottom (YAB - Yet Another Bottom).  But looking at the details, we have seen this kind of deals before. 

Nouriel Roubini exposes the truth.

Merrill is financing 75% of the transaction.  Merrill has not announced the terms of the agreement.  We have seen this kinds of voodoo transactions in the past.  According to Nouriel, in exterme scenario, the CDOs could be worth as low as 5.5 cents  on the dollar.

Of course, you will have other companies pricing their CDOs at 22 cents on the dollar and calling it a bottom.  But we have seen the Australian banks take much bigger cut than merrill and now we know why.  The accounting games are getting more creative. 


And now the FASB may delay the rules to bring SPEs on balance sheets. 


Troubles in those off-balance sheet assets have been blamed for helping trigger the credit crisis. FASB members have said they believe the current rules prevented investors from understanding the true risks banks faced. Analysts have estimated the rule change could force banks to bring $5 trillion in assets onto their books.

So let's just keep the game going a little bit longer.  No need to bring worthless securities onto balance sheet.  No need to tell investors it's worth next to nothing.  Keep Enron accounting going.

"Changes to securitization accounting could have a dramatic impact on the economy, the capital markets and consumers seeking credit," Republican Rep. Spencer Bachus of Alabama said in a letter to the chairmen of FASB and the U.S. Securities and Exchange Commission last week.

Our economy is not doing too well, please let the credit games continue.  When are the politicians going to realize this is the problem in first place and not the solution.  We need to take our medicine and stop these fake games.



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