Quote from denner:
I think that you're standing on a flimsy argument with this "share prices" that you keep repeating. The reality is that several institutions have been given a "protected" status and will be kept alive as long as needed (read zombie banks). If it WERE NOT a kleptocracy, we'd have already either nationalized these institutions or broken them apart. Stripped out the many departments and more than likely re-instituted Glass-Steagall. If it WERE NOT a kleptocracy, banks that received bailouts would never have been allowed to return to proprietary trading, leveraging up the hilt in various asset classes, essentially using no cost funding to pump up commodity, energy prices, etc, etc...If it WERE NOT a kleptocracy, all of these opaque, off balance sheet derivatives contracts would be brought onto a central clearing facility and REALISTIC marks would be assigned to them. They would not be hidden in some dark place and then played fast and loose with at the discretion of the institution.
As for why I say, "Why don't you go do X?", well, why don't you, instead of playing armchair quarterback? You seem to think you're the smartest guy in the room, so prove it, rather than assert it.
This argument isn't about me, I'm irrelevant to this broken system. It's pretty common knowledge that these pension funds have not been able to generate those requisite 8% annual returns. If there were some interest income (no ZIRP), at least the shortfalls wouldn't be so disastrous. Instead, once again the taxpayer is emburdened with making the pensioners "whole" with a combination of service cuts and an alphabet soup of fees and taxes.
You act as if MTM accounting doesn't have any issues in and of itself, but it does have the quite significant issue of being extremely pro-cyclical, so it's not as if it's perfect. The market's rise since then could simply be an assessment that the MTM marks that banks would have had to take would have been too extreme relative to the likely default rates on the assets being held, due to the pro-cyclicality of MTM, making the removal of the rule the better long-term policy, especially for illiquid assets.
That's a recipe for abuse. So they can mark things favorably when it suits their needs and simply say "hey this price is too low" so now I'm not going to MTM. Sorry, this is the epitome of moral hazard. It's also why this off the balance sheet, leveraged debacle continues to plague these markets. Without an intermediary to keep things honest, this cycle will continue to replay time and time again. All one has to do is look at the mess banks have gotten themselves into investing in European debt. Heck, I've read any number of reports of just how much Euro debt these companies really have on the books. Money market funds, corporations (vendor financing), banks, etc...Chasing yield thanks to perpetual ZIRP.
Also, I'm pretty sure that every single industry in the US is subsidized in one way, shape or form. I pointed out that the rationale for what seems to be skewed compensation is actually based on the company's pursuit of the best long-term human capital strategy, so that what seems egregious to you is actually quite rational for the company.
Of course it's rational to the company. Either we have regulations, a system of laws and enforcement or we don't. This is the crux of the matter and a by-product of moral hazard run amok. Until institutions actually believe they will live or die via their pursuit of outsized risk, we will continue to see a complete mis-allocation of resources and investment. Why invest in the economy, if "we the company" can just lever up on some sovereign debt and then create another "superfund" to buy up all our bad assets and make us whole again.
