Lehman & AIG - Is it just due to subprime mortgages

[shotgunner]

I seem to recall seeing a statistic somewhere that even with the current subprime crisis that the vast majority of mortgage holders, high 90 percentile were making their monthly payments. I am starting to think that when the dust settles there is more to the story of these large firms failing than just the problems in the subprime market. Investments in commodities, fall and rise of the dollar etc. There is more going on than meets the eye regarding these business failures I think.

 

[haha]

I seem to recall seeing a statistic somewhere that even with the current subprime crisis that the vast majority of mortgage holders, high 90 percentile were making their monthly payments. I am starting to think that when the dust settles there is more to the story of these large firms failing than just the problems in the subprime market. Investments in commodities, fall and rise of the dollar etc. There is more going on than meets the eye regarding these business failures I think.

A lot of this would not have happened without mark-to-market accounting. That is one reason why is seems so much wilder this time. It creates spirals of markdowns causing balance sheet stress causing asset sales causing markdowns etc.

Ha

 

[eridanus]

A lot of this would not have happened without mark-to-market accounting.

Mark-to-market accounting in a non-public market, that is. When it's a commodity such as Wheat you know exactly where you are at the end of the day. For exotic derivatives, the value was obviously a WAG, with some fancy equations tossed in for good measure.