The 60 Second Update
with Newt Gingrich
1. While Congress debates, what can the President do today?
Without delay, the President should take the one regulatory action that can help immediately to calm markets and dramatically reduce the taxpayer risk in any necessary government intervention: he should call SEC Chairman, Chris Cox and tell him to suspend the mark to market accounting rules which are a fundamental problem today. These rules can be suspended by the Securities and Exchange Commission and can be replaced over the next few weeks with a more accurate system.
Mark-to-market accounting means that companies must value the assets on their balance sheets based on the latest market indicators of the price that those assets could be sold for immediately. Under such a rule, declining housing prices don't just reduce the value of defaulting mortgages, they reduce the value of all mortgages and all mortgage-related securities because the housing collateral protecting them is worth less.
Brian S. Wesbury and his colleague Bob Stein at First Trust Portfolios of Chicago estimate that “probably 70% of the real crisis that we face today is caused by mark-to-market accounting in an illiquid market.”
If the SEC, with the President’s backing, can fix 70% of the financial crisis by changing the mark-to-market accounting rule, we should change the rule first before attempting to pass another reevaluated bailout package. They don't have to wait for Congress. They can act today.
Question 2. The most important change to the original bill
Former Speaker of the House, Newt Gingrich is Chairman of the Gingrich Group, a communications and consulting firm that specializes in transformational change. He is the founder of the Center for Health Transformation and serves as General Chairman of American Solutions