DEAR Uncle Sam,
My mother told me to send thank-you notes promptly. I’ve been remiss.
Well, Warren, you have a large chunk of Wells Fargo stock. Why don't you force the management to value its 2nd-mortgage paper at market?
And by the way, will you take back all the first-mortgage paper that Wells Fargo ginned up and sold to Fan/Fred/FHA?
ALL of it?
Half the problem was valuing these assets at market. Originally the banks wanted to value them less like they did before mark-to-market. Now that the assets are distressed, people are claiming they should be marked at market value. The assets weren't properly valued when they didn't reflect their lack of liquidity, and they aren't properly valued if they are priced as distressed if the underlying asset is not distressed.
ReplyDeleteYah, but what IS the 'underlying asset'?
ReplyDeleteHard goods like machinery/equipment, commercial buildings, and homes are declining in value.
Cash-flow of the debtors may be fine, but either the "asset" is the cash-flow OR the hard-good.
Take your pick, or state clearly that the banks will use either/or, depending on what looks best.
Frankly, I don't care what they use; but Buffet's love-letter is a little........ahhh........disingenuous.