Posts by Teresa Ghilarducci

April 5, 2009, 11:44 AM ET

Beware the April 4th Stock "Mark to Market" Rally

By Teresa Ghilarducci

Happy in the despair over the miserable jobs report (not only did we lose over a million full time jobs last month, employers are still cutting hours and people are still filing for unemployment) was a jump in stock values. Hooray?!

Put down your party hats.

The stock market could have been rallying on a politically driven numbers game; nothing seemed to have fundamentally improved.

Here is the story.

On Thursday April 2, the serene and independent “Financial Accounting Standards Board” did something not so independent and calm: they voted to allow banks to move off “mark to market.” In other words, banks can now use their internal models to value their assets instead of using market values. To me it sounds like the same old problem. As Saturday’s Financial Times asked, “Are we back to flair value and marking to myth?”

A phlegmatic analyst, Jennifer Thompson,

A Tale of 2 Bailouts

By Teresa Ghilarducci

Rick took the bullet. The public wanted blood for the financial crisis, for the obscene executive bonuses, for their own belief that housing prices could never go down. The mob needed a scapegoat and Rick Wagoner, chief of GM, stepped down on Monday as a condition of the administration’s plan to extend more loans to GM and Chrysler. He was essentially fired by the President of the United States.

A mid-March CBS survey revealed 18 percent of Americans wanted government loans to auto companies, 38 percent approved of help to financial firms. None of this is much support, but a politician minimizing losses might dump the car people and keep the money people.

Just the word “bailout” made people’s teeth hurt; you bailout your nephew from jail; clearly bailouts aren’t alike, here is a tale of two bailouts...

Bank Stress Tests Are Jokes

By Teresa Ghilarducci

On February 12 Treasury Secretary Tim Geithner announced he would make investors and the public trust banks again. The idea is that in a few weeks from mid-February — that date is approaching — the results of a bank stress test of the largest banks would be known.

The stress test is supposed to give a realistic picture, transparency, and thus confidence about these important institutions. Stress testing your new relationship might entail wrecking your boyfriend’s new car. You’d learn valuable information. A stress test is a little exercise aimed to identify which banks could fail under the most dire circumstances: Many people lose jobs and default on credit card etc. The stress situation is supposed to be the worst of the worst — a 3 standard deviation event. But if the stress conditions are just the status quo, the stress test creates stress. Are you satisfied to know your plane can...