Quotes of the day

In many cases rent control appears to be the most efficient technique presently known to destroy a city—except for bombing.--Assar Lindbeck

If Chrysler goes belly up, it also might have forced some deep introspection at Ford and G.M. and might have changed their attitude toward fuel efficiency and manufacturing quality.--Barry Ritholtz

Naked I came from my mother's womb, and naked I will depart.--Job

Lo and behold, the CFTC found that index traders and swap dealers actually reduced their stake in crude oil futures as prices spiked. The number of contracts held by these investors betting that prices would increase -- the net long position -- fell by 11%, and more were shorting oil than going long over the six-month period. In other words, index traders and swap dealers were driving the future price of oil down.--WSJ Editorial Board

Many assets are highly illiquid and the institutions that hold them, such as banks, are in the business of providing liquidity to the economy and holding such assets as collateral. Making those assets "mark to market" meant that reserves were drawn down and converted into ever more loans during the upswing, and now must be built back up at a time when asset prices are plummeting and capital is scarce. Instead, a more stable capital adequacy rule -- such as a leverage ratio that was based on the original asset values -- would limit this pro-cyclical behavior. This means that the complex approach taken in the Basel II discussions for international capital rules need to be scrapped, and the process restarted.--Larry Lindsey