'..The crisis effectively ended with the stroke of the pen by the Financial Accounting Standards Board. That happened on March 16, 2009, when the FASB announced its intention to abandon mark-to-market rules, in response to Congressional pressure by the House Committee on Financial Services on March 12, 2009. The final vote was on April 2, 2009..'<blockquote>'As the bubble collapsed, banks and other financial institutions plunged into insolvency, as losses on mortgage-backed securities dragged the assets on their balance sheets below the value of the liabilities they owed to depositors and bondholders. The crisis effectively ended with the stroke of the pen by the Financial Accounting Standards Board. That happened on
March 16, 2009, when the FASB announced its intention to abandon mark-to-market rules, in response to Congressional pressure by the House Committee on Financial Services on
March 12, 2009. The final vote was on
April 2, 2009. Read those links, and the reality of what happened will become clear. The decision gave banks and other financial institutions “significant judgment” in the values that they assigned to assets, rather than booking them at market value. With that discretion, financial institutions could use cash-flow models (“mark-to-model”) to instantly transform previously insolvent balance sheets to solvent ones. They immediately did just that, and in hindsight, regulators went along with it.
Fed-induced yield-seeking has certainly had the effect of amplifying the speculative preferences of investors when they are already inclined to seek risk (though Fed action has little impact when investors are risk averse, as we saw during the collapse of the two bubbles that preceded this one). The ability to infer investor risk-preferences from market internals is indispensable to distinguish speculative bubbles – even yield-seeking ones – from the inevitable collapses that follow. I’m convinced we have the right tools to do so here, and to do a far more adept job of navigating future (or continued) bubbles, should that occur.'
- John P. Hussman,
The Hinge, October 19, 2015</blockquote>
Context<blockquote>
(Big One: 2015 - 2017) - 'The Fall of a High-Yield Fund Echoes 2007 Crunch''..inflating an especially dangerous Bubble at the heart of “money” and Credit..''The scope of the down cycle is proportional to the excesses of the preceding Credit boom.''..a gradual corruption, on the American continent as well as in Europe, of the traditional principles of accounting..' - Jesús Huerta de Soto'..the greatest error of the accounting reform recently introduced worldwide..' - Jesús Huerta de SotoEconomic Recessions, Banking Reform, and the Future of Capitalism - By Jesús Huerta de Soto</blockquote>