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Q&A: FASB meeting March 12, 2009 what are they speaking about?

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Query by : FASB meeting March 12, 2009 what are they talking about?
can anybody tell me what the FASB meeting on March 12, 2009 was about I study the entire write-up and cant understand any of it. Please support

Very best answer:

Answer by Bonimba
It was about “mark to industry” accounting, or the practice to worth assets that are not traded on markets in a way that is commensurate with what the markets would worth them. In other words, if the assets you own are not traded on any marketplace, then you have to use best judgment to “guess” what they ought to be worth. You can think about that in the course of the financial meltdown, when firms and banks had to liquidate assets at any cost, having to mark similar assets at these levels would have resulted in an endless downward spiral. Hence the monetary crisis, hence some relaxation of the guidelines that helped the stock industry choose up once more.

FASB Chairman Robert H. Herz Testifies on Mark-to-Market Accounting

Norwalk, CT, March 12, 2009—Robert H. Herz, Chairman of the Financial Accounting Standards Board (FASB), testified about mark to industry accounting today just before the U.S. Residence of Representatives Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises. Herz appeared at a hearing convened by Congressman and Committee Chairman Paul E. Kanjorski (D-PA) on “Mark-to-Marketplace Accounting: Practices and Implications.”

“Many investors have produced it clear that, in their view, fair value accounting permits organizations to report amounts that are much more relevant, timely, and comparable than amounts that would be reported beneath option accounting approaches, even in the course of intense market place circumstances,” mentioned Chairman Herz.

Herz underscored the significance of neutral, independent standard setting to capital market investors, and noted that after gathering substantial input about fair value from a diversity of capital market place participants, the prevailing view urged the FASB not to suspend or weaken mark to market place accounting rules. “While bending the guidelines to favor a distinct outcome may seem appealing to some in the quick run, in the lengthy run, a biased accounting normal is dangerous to investors, creditors and the U.S. economy,” mentioned Herz.

Addressing misconceptions that mark to market is a broadly applied rule, Herz explained that so named “mark to market” accounting normally only applies to trading accounts and derivatives that don’t qualify as hedges. Furthermore, Herz clarified that the use of fair value for measurement depends on each the nature of a financial asset and its intended use by an institution. Herz added that current economic reporting in the U.S. and elsewhere across the planet included the use of both fair value and historical cost.

In response to the current difficult market place conditions and feedback from a wide array of investors and constituents—including the SEC—the FASB lately announced projects intended to boost the application guidance used to establish fair values as nicely as enhancing disclosures in financial reports. (http://www.fasb.org/news/nr021809.shtml). Earlier in the crisis, the FASB and SEC jointly issued new guidance on the application of fair value in illiquid markets. (http://www.fasb.org/news/2008-FairValue.pdf).

“The truth that fair worth measures have been challenging to decide for some illiquid instruments is not a trigger of existing difficulties but rather a symptom of the several difficulties that have contributed to the international crisis—including lax and fraudulent lending, excess leverage, the creation of complex and risky investments through securitization and derivatives, the global distribution of such investments across quickly expanding unregulated and opaque markets lacking a appropriate infrastructure for clearing mechanisms and price discovery, faulty ratings, and the absence of appropriate risk management and valuation processes at numerous financial institutions,” Herz stated.

Given the challenging financial atmosphere, Herz underscored the FASB’s commitment to continue operating actively with regulators and constituents to provide guidance on reporting problems emanating from the monetary crisis and continue its project with the International Accounting Requirements Board (IASB) to improve, simplify and converge the accounting standards for financial instruments.

The full text of Chairman Herz’s testimony is positioned at www.fasb.org

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Since The Financial Mess Was Produced By Obama And Other Democrat Politicians, Need to They Give Up..?

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Query by a bush household member: Considering that The Financial Mess Was Created By Obama And Other Democrat Politicians, Must They Give Up..?
their salaries, and function for cost-free? Like the way they want automakers’ CEOs to do?
1) The final Democrat president designed the housing bubble which is now collapsing. http://www.frbsf.org/publications/economics/letter/2006/el2006-30a.gif (non biased U.S. Federal Reserve web site)
2) Democrats triggered the housing bubble to collapse by lowering customer confidence (adverse campaigning) and by encouraging home builders to overbuild by employing illegal immgrant labor to generate 100% to 400% earnings. ( Democrats blocked huge efforts created by President Bush to fine employers of illegal immigrants.)
3) Clinton ignored a government report that stated bank derivatives had been dangerous to the economy. He also threatened to fine banks that had been not giving loans to poor individuals.
4) Clinton, ACORN, OBama, and Rubin pushed for changing laws to offer a lot more risky loans.
6) Obama and other Democrats voted for weak border handle which decreases wages, increases joblessness, lowers the normal of living, etc.
7) Democrats blocked President Bush’s GSE reform (Fannie Mae and Freddie Mac reform) by filibustering in congress..
8) $ 700 billion was spent to repair Clinton’s bank derivatives issue.
9) Democrats elevated our dependence on foreign oil. That increases gas bills, hurt the economy, decreased national security, and is providing other countries hundreds of billions of dollars yearly. Also, it als financially aids numerous countries which do not have our best interests in mind.
Because 2001, President Bush warned of the issue and put forward plans to fix Fannie Mae and Freddie Mac:
http://www.whitehouse.gov/news/releases/2008/09/20080919-15.html
In 2003, “Spurred by worries that Fannie and Freddie had been cooking their books and taking as well many risks, Treasury Secretary John Snow proposed putting the businesses beneath Treasury oversight with strict controls more than threat and capital reserves. The NYT labeled the proposal “the most substantial regulatory overhaul in the housing finance business because the savings and loan crisis a decade ago””
http://www.usnews.com/blogs/sam-dealey/2008/9/10/barney-franks-fannie-and-freddie-muddle.html
In 1997 Clinton “actively sponsored ” risky home loans :
“”…speedy development in affordable-loan programs and subprime lending…”
“The development in these [specific loan] programs has been actively sponsored by the Clinton administration ”
“The presently robust housing industry is due in part to the initiation of a wide assortment of cost-effective home-loan programs. These programs are intended to advantage low-earnings and minority households and neighborhoods by way of much more versatile underwriting policies. These policies consist of low-downpayment specifications, larger acceptable ratios of debt payment to revenue, the use of option credit history information such as records of payments for rent and utilities, versatile employment standards, and decreased cash reserve needs. The development in these programs has been actively sponsored by the *** Clinton administration *** in a concerted effort to raise home-ownership rates.”
Mortgage Banking [News] – Aug 1, 1997
One particular of Clinton’s Freddie Mac changes:
“Freddie Mac, one particular of the primary government-sponsored enterprises involved in the obtain of mortgages, not too long ago announced plans to enter the secondary marketplace in subprime loans by purchasing substantial numbers of “A minus” subprime mortgages by 1998 and the higher-threat “B and C” loans by 1999.(20) ”

1 of Clinton’s modifications to foreclosure insurance coverage ( that protected banks ).
“On June 6, 1996, President Clinton announced that he had directed FHA to decrease the up-front mortgage insurance premium (UFMIP) for 1st-time homebuyers who obtain housing counseling”
Democrats’ response to President Bush’s reform of Fannie Mae And Freddie Mac.
“These two entities—Fannie Mae and Freddie Mac—are not facing any kind of monetary crisis,” mentioned Representative Barney Frank of Massachusetts, the ranking Democrat on the Economic Services Committee. “The much more men and women exaggerate these troubles, the much more stress there is on these companies, the much less we will see in terms of affordable housing.”
http://www.usnews.com/blogs/sam-dealey/2008/9/10/barney-franks-fannie-and-freddie-muddle.html
Democrat Barney Frank: In April 2004, Fannie announced a multibillion-dollar financial “misstatement” of its own. Mr. Frank was back for the defense. Fannie and Freddie posed no danger to taxpayers, [ Barney Frank ] said, adding that “I consider Wall Street will get over it” if the two collapsed. Yes, they are undoubtedly “over it” on the Street now that Uncle Sam is guaranteeing their Fannie paper, and even Fannie’s subordinated debt.
http://www.wsj.com/write-up/SB122091796187012529.html?mod=article-outset-box
[ Democrat Barney] “Frank was publicly arguing for an increase in the size of their combined $ 1.4 trillion portfolios right up to the day they had been bailed out. Even now, following he’s been proven wrong about a taxpayer guarantee, he opposes Treasury’s planned reduction in the size of the portfolios starting in 2010, according to a quote attributed to him in this newspaper last week. “Great luck on that,” he reportedly said. Mr. Frank’s spokeswoman hung up the phone when we sought confirmation Tuesday” … “For years, Mr. Frank and other pals of Fan and Fred opposed not only bills written to limit the size of their portfolios”
Wall Street Journal.
http://www.wsj.com/post/SB122161010874845645.html?mod=article-outset-box

Ideal answer:

Answer by how is babby formed
Do they want the CEOs to function for cost-free or do they want them to give up their private jets?

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Seeing as how Republicans got us in this mess, should they be taxed at a greater rate to spend it off?

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Question by Who’s Your Daddy Now: Seeing as how Republicans got us in this mess, ought to they be taxed at a higher price to pay it off?

Best answer:

Answer by Philip McCrevice
Funny.

Dems had been in handle of Congress when the economy tanked.

In fact, when Republicans had been in charge of Congress, we were cruising financially. Despite the loans to the dem voter base that ought to never ever have been allowed.

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My question is in two parts. What are Hedge funds and how did they contribute to the currect economic down tur?

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Question by : My question is in two parts. What are Hedge funds and how did they contribute to the currect economic down tur?
The second question is how do subsdies from developed countries under cut developing countries,ie,Europe and Africa.

I am a lay man so please go easy on me a simple answers will do.I am not interested in Politicsssssssssssssssssss

Best answer:

Answer by financegal27
Ok I’ll try my best to answer these questions:
1. What is a hedge fund?
Hedge funds like mutual funds for high net worth and institutional investors. Hedge funds are Regulation D offerings under the SEC code, and as part of the Regulation D requirement they are not an investment that can be offered to all investors, cannot be marketed directly to the public, and to meet the SEC guidelines they can only be offered to accredited investors or qualified purchaser depending on if they are considered 3c-1 or 3c-7 funds. They are not subjected to the restrictions of the 40 Act.

An accredited investor is defined as:

1. a bank, insurance company, registered investment company, business development company, or small business investment company;
2. an employee benefit plan, within the meaning of the Employee Retirement Income Security Act, if a bank, insurance company, or registered investment adviser makes the investment decisions, or if the plan has total assets in excess of $ 5 million;
3. a charitable organization, corporation, or partnership with assets exceeding $ 5 million;
4. a director, executive officer, or general partner of the company selling the securities;
5. a business in which all the equity owners are accredited investors;
6. a natural person who has individual net worth, or joint net worth with the person’s spouse, that exceeds $ 1 million at the time of the purchase;
7. a natural person with income exceeding $ 200,000 in each of the two most recent years or joint income with a spouse exceeding $ 300,000 for those years and a reasonable expectation of the same income level in the current year; or
8. a trust with assets in excess of $ 5 million, not formed to acquire the securities offered, whose purchases a sophisticated person makes.

A hedge fund can use a variety of investment techniques that mutual funds cannot, they can hedge positions by shorting stocks, purchasing derivatives, swaps, leverage arbitrage, etc.. They are a complicated investment, that can be very risky and require sophisticated investment knowledge to make an educated decision as to what to invest in. Though, contrary to popular belief the majority of hedge funds are often less risky an investment than most mutual funds, the reason people have concerns with them is actually due to the operational differences and smaller nature of the firms that run them. The strategies can be complicated though and while the goal is to reduce risk understanding the strategies is really important because some strategies actually are quite flawed and/or expose you to risks that are different than traditional market risk which can result in significant losses.

2. How did hedge funds contribute to the current economic downturn?
They really didn’t, I’m not sure why they continued to get blamed for it. The current economic down turn was caused by a number of things, but mostly it was due to easy credit, the excessive use of leverage by investment banks, flaws in the securitization of mortgage securities, failure of the SEC and other regulatory authorities in the oversight of these organizations, failure of the rating agencies to properly evaluate the risks of securitized fixed income products. The hedge funds had nothing to do with it. They are investors who lost money as a result of this as well.

3. How do subsidies from developed countries under cut developing countries. Well this is really best addressed by simple economics, subsidies are a type of financial assistance provided by the government to help benefit a specific industry. The problem is it artificially warps the normal laws of supply and demand. In general its the subsidies that the emerging economies themselves provide that cause problems. For example, China has historically subsidized oil prices, meaning they set the price of oil at a rate to help facilitate the demand, using the government’s surplus to cover the difference. So let’s say China wants the price of oil to be $ 20 to make it affordable for the people, but oil costs $ 50, the government subsidizes the difference and the people’s demand reflects the $ 20 price, this means that demand would be much greater than price and supply warrants, pushing up the price of oil for everyone else, so everyone else suffers. Eventually so does the government providing the subsidy because their costs skyrocket and this leads to a major downturn in oil prices as the government adjusts or removes the subsidy, demand falls very suddenly and prices crash. In the mid 1900s the U.S. government subsidized the farmers in this country to ensure that they would be able to make an attractive profit and encourage them to keep harvesting as the cost of production was rising. However the subsidy artifically solved the problem, farmers ended up producing more than was demanded, prices fell and the subsidy no longer covered the short fall so many farms went out of business. This links below also covers this issue in depth:
http://www.businessbookmall.com/Economics_31_The_Economics_of_Government_Subsidies.htm
http://www.economicshelp.org/marketfailure/subsidy-positive-ext.html

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Can someone explain Securitizations and CDOs and how they contributed to the economic collapse?

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Question by Charlie: Can someone explain Securitizations and CDOs and how they contributed to the economic collapse?
I’m writing a research paper and I can’t get a grasp of HOW these aided in the collapse of companies.

Best answer:

Answer by LouBee
It made it easy to unload toxic loans on unknowing investors.

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