A step toward a financial fix
October 3, 2008 | By Nathaniel Ward
Even as Congress debated a modified version of the $700 billion Wall Street rescue package—263 representatives voted this afternoon in favor of the plan, which the Senate approved Wednesday—the government was taking steps to address the ongoing financial crisis.
On Tuesday the Securities and Exchange Commission and the Financial Accounting Standards Board clarified their "mark-to-market" accounting regulations, an important step towards cleaning up the financial mess.
"It sounds like a small thing, especially when compared to a $700 billion rescue plan," Heritage Foundation experts David John and James Gattuso write, "but it is a significant step toward addressing the causes of the credit crisis."
The original rule, they explain, meant "that firms should value their assets based on their current market prices rather than at the price the firm originally paid for them."
But while this is generally a good idea, it can spell trouble when assets are hard to price or lack any trading value whatsoever. In short, it can distort the view of a firm's financial health, since it can make a company's assets appear smaller.
"By itself, of course, the notification [of the mark-to-market change] does not solve the financial markets' problems," John and Gattuso conclude. "But it is one among many steps that can be taken to address the current crisis."
Do these other steps include ever-more regulation, as the Left argues? Hardly.
Heritage economist J.D. Foster writes in the Los Angeles Times that intrusive government policies won't prevent calamity: "Europeans have been rather smug about our troubles, but they're now looking at failures of their own major financial firms, nationalization of their banks and threats of a banking panic. It turns out their heavier regulatory hand was no defense against the current crisis. Nor did their regulators fare better in ferreting out the gathering dangers."
Webcast: Gen. Petraeus at Heritage next Wednesday
Gen. David Petraeus will speak at The Heritage Foundation next Wednesday, October 8, at 11:00 a.m. Eastern time.
Watch a webcast of his remarks live on MyHeritage.org.
As commander of allied forces in Iraq from 2007 through last month, Gen. Petraeus oversaw the surge strategy that helped curb violence in the country. He is slated to take over at the end of October as commander of the United States Central Command, which is responsible for all operations in Iraq, Afghanistan and the Middle East.
No seats remain to watch this event in person.
Conservatives' future
The Heritage Foundation has two more important webcasts next week:
- Tuesday, October 7, at 1:40 p.m. Eastern — What happens after the election for conservatives? Michael Barone, a writer for U.S. News & World Report and the author of the Almanac of American Politics, will answer this question as he delivers the David Brown Lecture at an event hosted by the Dallas/Fort Worth Committee for Heritage. Heritage President Ed Feulner will also speak on the Leadership for America campaign, our ten-year program to get the country back on track.
- Thursday, October 9 at 7:00 p.m. Eastern — Fred Barnes, a regular commentator on Fox News and the executive editor of the Weekly Standard, will discuss conservatives' outlook in the context of the coming election. The event is hosted by the Atlanta Committee for Heritage.
Watch both events live on MyHeritage.org.
Other Heritage work of note
- Heritage Foundation research has a real impact—outside the Beltway as well as inside it. One news report finds that when she was considering whether to proceed with construction of the Bridge to Nowhere, Alaska Gov. Sarah Palin was swayed by Heritage expert Ron Utt's article on the topic.
Newsweek has the story: "'I gave her the Heritage Foundation piece and said this is not a good project and she should think about reappropriating the money,' [Alaska Transportation Priorities Project director Lois] Epstein told ProPublica. Palin replied that her administration was 'very close' on making a decision, Epstein said. Two months later, Palin announced the state would no longer pursue the $398 million design."
- Energy and Environment. Heritage's David Kreutzer makes the economic case for drilling in oil reserves: "Increasing domestic production of petroleum will affect the economy two ways: First, it will reduce the amount we spend on imported oil. Second, it will lower the price of petroleum. The two effects work together to reduce energy expenditures, reduce the trade deficit, and expand economic activity."
In other news
- Employers cut 159,000 jobs in September, the most since 2003.
- California's overspending has led the state into a fiscal hole—and now Gov. Arnold Schwarzenegger is warning that his state may need a $7 billion loan from the federal government to stay afloat.
- The Associated Press reports that incentives given to new recruits allowed the Army, Navy, Marines and Air Force to meet their recruiting goals for fiscal 2008, which ended this week.
- Wells Fargo will acquire Wachovia's banking operations. The struggling Wachovia had earlier announced plans to sell to Citigroup.
- Pakistan's interior minister says his country will fight militant groups until his nation is "terrorism free."
Coming up at Heritage
To attend these or any other events at Heritage please RSVP at Heritage's website. Or you can view these events live online. All times are Eastern.
- On Tuesday, October 7 at noon, scholar Harvey Mansfield explains the importance of the Constitution as conservatives seek to define their role in society and government.
- On Wednesday, October 8 at 2:00 p.m., a panel of experts looks at China's recent successes in space and explores whether America is losing this new space race.
Nathaniel Ward is the Editor of MyHeritage.org—a website for members and supporters of The Heritage Foundation. David Talbot contributed to this report.