March 23, 2009

No, Matt Taibbi... you DON'T know what you're talking about

Over at Rolling Stone, Matt Taibbi has a really frustrating piece of journalism about the credit crisis, underlying causes and what's happening now to fix it. It's the last part where Matt goes off the goddamn rails and proves just how hard this stuff is to understand.

Grayson pressed on, demanding to know on what terms the Fed was lending the money. Presumably it was buying assets and making loans, but no one knew how it was pricing those assets — in other words, no one knew what kind of deal it was striking on behalf of taxpayers. So when Grayson asked if the purchased assets were "marked to market" — a methodology that assigns a concrete value to assets, based on the market rate on the day they are traded — Kohn answered, mysteriously, "The ones that have market values are marked to market." The implication was that the Fed was purchasing derivatives like credit swaps or other instruments that were basically impossible to value objectively — paying real money for God knows what.

"Well, how much of them don't have market values?" asked Grayson. "How much of them are worthless?"

"None are worthless," Kohn snapped.

"Then why don't you mark them to market?" Grayson demanded.

"Well," Kohn sighed, "we are marking the ones to market that have market values."

In essence, the Fed was telling Congress to lay off and let the experts handle things. "It's like buying a car in a used-car lot without opening the hood, and saying, 'I think it's fine,'" says Dan Fuss, an analyst with the investment firm Loomis Sayles. "The salesman says, 'Don't worry about it. Trust me.' It'll probably get us out of the lot, but how much farther? None of us knows."

Here's the thing... just because something doesn't have a mtm price doesn't mean it's worthless (and Rep. Grayson's a fucktard). There's discounted cashflow and other valuation methods, for example, so despite what the loser from Loomis Sayles (where the not too bright go to die) says, it's not about trust. It's about hard data and the Fed EXISTS for just this type of market breakdown. Meanwhile, to Matt, it looks like the goddamn crooks are out to steal from us again, which was, not coincidentally, exactly what he was trying to pound into the reader for graff after tedious graff.

Don't get me wrong, he nailed the stuff about deregulation and the fact that the largest banks are growing far too large at the expense of smaller competitors who don't enjoy the use of taxpayer capital. And the portrait of AIG's Cassano was brilliant.

But the breathless, they're-stealing-everything tone was far better suited to Rush Limbaugh... or Michelle Malkin.

Posted by mcblogger at March 23, 2009 09:42 AM

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