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Norm's Financial and Business Thoughts
This blog contains comments about a broad array of financial and business topics affecting the U.S. economy, both from national and international sources. They include events in the U.S. and other countries as well. Norman has had a long business career as a financial and insurance executive and business consultant. He is a both an actuary and CPA.
Norman E. Hill is the author of:
Winner and Final Chairman
An Expose of an American Corporate Power Struggle and $138 Million Golden Parachute
If you read Barbarians at the Gates or followed Enron, you'll enjoy this fictionalized version of a corporate power struggle. It shows how a visionary business plan, not followed through, and never-ending corporate politics, undid a promising turnaround. read more
by Norman E. Hill ~ 0-7414-4773-8 ©2008
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Disclosure, Not Destruction--Mark to Market Accoun...
Sunday, July 05, 2009 |
Note to State Legislators
Thursday, July 02, 2009 |
Will the Real Market Value Stand Up
Sunday, June 28, 2009 |
Market Values and Accounting/Economic Crisis - The...
Thursday, June 25, 2009 |
Economic/Accounting Crisis Update
Wednesday, June 24, 2009 |
Economic Crisis is Really an Accounting Crisis
Monday, June 22, 2009 |
Trial Balloon re Gov't Confiscation of Private Ret...
Saturday, June 20, 2009 |
Developments in Mark to Market Accounting
Sunday, April 26, 2009 |
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Economic Crisis is Really an Accounting Crisis
We urge you to write a letter like the one I show below to your Senator and Crongressman.
We urge you to reject the administration's bailout program for financial institutions. The current crisis is not a true economic crisis, but rather a crisis generated by bad accounting, which has then spread to the economic system. Specifically, the crisis has been caused by artificial fair value accounting, which has applied fire sale rules to assets that are temporarily illiquid rather than permanently impaired.
In the past, fair market value, at least implicitly, has meant the present value of cash flows of assets. Fire sale value was only applied to permanent impairments. However, the SEC and FASB have mandated the fire sale approach to all illiquid assets, with disastrous results to the balance sheets and retained earnings of financial institutions.
Therefore, I urge you to do the following:
1. Mandate that the SEC redefine fair value accounting as present value of cash flows, except for permanent impairments. Fire sale values can be disclosed, but not used to determine balance sheets or retained earnings.
2. Continue the alternative House plan for financial institutions to join in a federal insurance program for these assets, aimed at restoring confidence.
On a related point, the insurance companies under the AIG holding company are all solvent as far as I can tell. None of their assets appear to mandate the fire sale accounting approach, even if it were valid. The illiquid assets that caused the AIG crisis appear to be all in the holding company.
State regulators control the insurance companies and they have properly kept them from paying upstream cash dividends to bail out the holding company. State insurance regulation has done its job. Proper fair value accounting at the holding company level, as I’ve described above, should solve the latter problem.
Paulson is an incredible albatross around the neck of the Republican Party. In any event, his bailout proposal should be rejected.
The above views are my own and are not necessarily those of any professional organization.
Norman E. Hill, FSA, MAAA, Member AICPA, ASCPA
NoraLyn Ltd.
Books By Hills"Winner and Final Chairman" Labels: AIG, Fair Value Accounting, FASB, financial crisis, OFC, Paulson, SEC
posted by Norm Monday, June 22, 2009
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