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Normally I spend a bit of time trying to revisit a concept someone else has come up with and try to put my spin on it, but the concept that Dave Ramsey has put on the table on how to get out of the economic turmoil that we are  experiencing is dead on.

By changing an accounting rule for the short term we have the potential to free up the marketplace and allow companies to allocate their capital effectively. Right now the Market Down to Market rule is choking Wall Street which is paralyzing Main Street.

If you are involved in the housing market, read the full article and contact your Congress person. It might stop a 700,000,000,000 dollar blunder.

However, it’s part of what’s caused this in the news now. Merrill Lynch was sitting with $30 billion are tied up in sub-prime loans with houses. Stupid! They get what they deserve for doing that, and I’m with you on that. Those houses didn’t become worthless all of a sudden because those people couldn’t sell their bonds. Since they couldn’t sell them, they basically gave them away for 22 cents on the dollar. Now do you think all those houses lost 80% of their value underneath that deal? No, they didn’t, so they gave them away for 22 cents on the dollar (about $6 billion total) because there was no market for them. Nobody wants to buy sub-prime bonds because they suck. They’re junk bonds. But at 22 cents on the dollar, it’s a bargain because even if you foreclosed on every one of the houses in there, you’d probably get $20 billion back out of $30 billion, and so the company that bought those for $6 billion got a deal! But there’s no market for them. That’s where these companies are stuck. They can’t sell this stuff, but accounting-wise, they’ve had to mark it down to market and it’s frozen the marketplace.

Economist Wesberry is saying that if we change that one rule and don’t force them to market down to market and just let them hold on to all the stuff, and say just on sub-primes for this period of time you can change that rule — a temporary change — that’ll free the market up. It’s seized right now; it’s frozen. This will thaw it out and get it going again. He says that’ll solve 60% of the problem … and I think he’s right.

That one accounting rule is what made Merrill Lynch sell out. That one accounting rule is what’s driving other ones into the dirt. Would you rather let them change their accounting rule or loan them $700 billion for us to buyout their bad paper? via Dave Ramsey.

Related posts:

1. Subprime Market on Wall Street a Free For All
2. Wall Street Pulls The Plug On SubPrime Market and Lenders Go Down The Drain
3. Sam Zell Blames Market Down To Market Rules For Wall Street Issues
4. Wall Street Fall Out Over Subprime Mess - 2 Execs at Merrill Fired
5. Subprime Lenders (and Wall Street Players) Facing Increased Federal Scrutiny