Jim Sinclair’s Commentary
Was this by omission or commission? Greenspan was neither asleep nor stupid. He knew exactly what he was doing.
Greenspan Slept as Off-Books Debt Escaped Scrutiny (Update1)
By Alan Katz and Ian Katz
Oct. 30 (Bloomberg) — As George Miller welcomed 60 bankers to the chandeliered Charlotte City Club one evening in September, the focus was on more than the recent bankruptcy of Lehman Brothers Holdings Inc. From their 31st-floor perch, members of the American Securitization Forum, which Miller leads, fretted about the future of their $10.7 trillion industry
The bankers were warned that a Financial Accounting Standards Board plan would force trillions of dollars back onto balance sheets, requiring cash reserves to soar. Their business of pooling and reselling assets had dropped 47 percent in the first six months of the year, and the industry couldn’t afford another setback.
The next day, Miller, 39, the forum’s executive director, took that message from North Carolina to a Senate hearing in Washington examining the buildup of off-balance-sheet assets. “There are great risks to the financial markets and to the economy of moving forward quickly with bad rules,” he said of FASB’s proposal.
Miller was trying to preserve an accounting rule for off- the-books assets that helped U.S. banks export toxic debt around the world. It is a loophole that Jack Reed, the Rhode Island Democrat who chairs the Senate securities subcommittee, said had contributed “to the severity of the current crisis.”
The damage to date: more than $680 billion dollars in losses and writedowns, about one-third of that by European banks.