# Have we hit bottom yet? **URL:** \ **Category:** Great Debates\ **Created:** [April 3, 2009, 6:38pm UTC](https://boards.straightdope.com/t/have-we-hit-bottom-yet/491894 "2009-04-03T18:38:59Z")\ **Posts on this page:** 20\ **Page:** 2
**Author:** ![Magiver](https://avatars.discourse-cdn.com/v4/letter/m/4491bb/32.png) [@Magiver](https://boards.straightdope.com/u/Magiver)\ **Post date:** [April 4, 2009, 10:50pm UTC](https://boards.straightdope.com/t/have-we-hit-bottom-yet/491894/21 "2009-04-04T22:50:45Z")
> [@DSeid](#): > > **Magiver** , okay, banks lending is not a metric of significance to you. I ask again then, what metric would you accept as a metric that banks are going to remain solvent and that therefore the recession has bottomed out? A chart showing cumulative bank equity versus debt risk that has been independently certified. > [@DSeid](#): > > The way you state it “banks are insolvent” is a statement of faith and not subject to falsifiability; surely you do not intend that. What do you submit as a meaningful metric? Or is it your position that it is impossible to know when we are bottoming out and that only the long distance look back will do as well? It was Geitner who said banks need 2 trillion dollars which indicates there is still debt on the books that has not been realized yet. We have not hit bottom. ---
**Author:** ![Spoke](https://avatars.discourse-cdn.com/v4/letter/s/a88e57/32.png) [@Spoke](https://boards.straightdope.com/u/Spoke)\ **Post date:** [April 5, 2009, 6:35am UTC](https://boards.straightdope.com/t/have-we-hit-bottom-yet/491894/22 "2009-04-05T06:35:50Z")
The mortgage crisis is just part A. The credit card crisis (part B) [still looms ahead](http://www.reuters.com/article/Finance08/idUSTRE4AC8PU20081113). ---
**Author:** ![DSeid](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dseid/32/20194_2.png) [@DSeid](https://boards.straightdope.com/u/DSeid)\ **Post date:** [April 5, 2009, 7:09am UTC](https://boards.straightdope.com/t/have-we-hit-bottom-yet/491894/23 "2009-04-05T07:09:19Z")
For the sake of clarity, who would you accept as having both the expertise and the independence needed to come up with those equity and debt risk charts? I fear that anyone with the expertise may be tainted by how they acquired such expertise. Also do these independent experts value at what the assets are worth if they needed to be all immediately liquidated or what they believe they will be worth over the longer term? Also when you answered your own question as to if banks were solvent with a “no” … on what do you base that given the lack of clear valuations available which would be needed to make such a definite conclusion? I would also ask for clarity as to your definition of solvency. [This author](http://brontecapital.blogspot.com/2009/02/bank-solvency-and-geithner-plan.html) in February offered up several definitions of solvency. The first was regulatory solvency and there he felt banks were likely not solvent (and agrees with you that their self-assessments are not to be trusted - “after all – they are bankers and they lie.” But he cares little about regulatory solvency: “It’s perfectly normal (and in my view acceptable) to have inadequate regulatory midway through a nasty downturn. Dividends should be cut, profit should be retained, even growth curtailed – all of which are how banks get back to normal regulatory capital – but confiscation or nationalisation of banks because the regulatory buffers have been removed is harsh – and unreasonable behaviour.” The next definition is positive net worth under GAAP, and for this definition of solvency he concludes “the banks almost certainly collectively pass. The losses (yield to maturity basis) are unlikely to be more than 2 trillion. We started with 1.4 trillion of capital – will have made probably 400 billion on pre-tax-pre-provision profits and having raised more than 500 billion.” The third solvency definition is positive economic value of the banking entity. Here he also grants them solvency: “The system in my view clearly has positive economic value.” At least assuming that the governmental response allows them to function. Fourth up is whether or not the banks have a positive liquidation value. And here it is a quick no. And no surprise there. No buyers on the spot means low low prices. And fifth is the closely related question of if banks have _enough_ liquidity. Here he notes that this is an issue of confidence. In the absence of a run on them then yes they do. It may be that declarations of insolvency are a bit premature. Or not, depending on the definition you choose. Which one do you believe is most important and why? How would you differ with the above analysis and on what basis? Moving along. Given that your concern, relevant to this thread’s op anyway, was how banks’ alleged certain impending insolvency is locking up the flow of money (“Because the answer is no we don’t have the liquidity to borrow money for manufacturing, purchase those goods, or buy new houses.”) why is not lending volume the key metric for you? ---
**Author:** ![Magiver](https://avatars.discourse-cdn.com/v4/letter/m/4491bb/32.png) [@Magiver](https://boards.straightdope.com/u/Magiver)\ **Post date:** [April 5, 2009, 9:12am UTC](https://boards.straightdope.com/t/have-we-hit-bottom-yet/491894/24 "2009-04-05T09:12:58Z")
> [@DSeid](#): > > For the sake of clarity, who would you accept as having both the expertise and the independence needed to come up with those equity and debt risk charts? I fear that anyone with the expertise may be tainted by how they acquired such expertise. Also do these independent experts value at what the assets are worth if they needed to be all immediately liquidated or what they believe they will be worth over the longer term? All businesses are subject to audit by independent accounting firms. The only time I ever experienced an audit I was amazed at how detailed the questions were and I was only a mirror to my company’s accounting department. I found myself in the middle of what I thought to be niggling bullshit (less than $1000 audit items). We’re talking about billions of dollars within individual financial institutions. It means that every loan is assessed for risk and is then posted against the balance sheet. > [@DSeid](#): > > Also when you answered your own question as to if banks were solvent with a “no” … on what do you base that given the lack of clear valuations available which would be needed to make such a definite conclusion? > > I would also ask for clarity as to your definition of solvency. [This author](http://brontecapital.blogspot.com/2009/02/bank-solvency-and-geithner-plan.html) in February offered up several definitions of solvency. > > The first was regulatory solvency and there he felt banks were likely not solvent (and agrees with you that their self-assessments are not to be trusted - “after all – they are bankers and they lie.” > > But he cares little about regulatory solvency: “It’s perfectly normal (and in my view acceptable) to have inadequate regulatory midway through a nasty downturn. Dividends should be cut, profit should be retained, even growth curtailed – all of which are how banks get back to normal regulatory capital – but confiscation or nationalisation of banks because the regulatory buffers have been removed is harsh – and unreasonable behaviour.” Numbers don’t lie. It’s truly not rocket science to value risk when loans are made. It doesn’t take any thought at all to plug the numbers into a spreadsheet using established risk assessment. Seriously, this has been done since the beginning of time and the lowest of auditors can handle the job. > > The next definition is positive net worth under GAAP, and for this definition of solvency he concludes “the banks almost certainly collectively pass. The losses (yield to maturity basis) are unlikely to be more than 2 trillion. We started with 1.4 trillion of capital – will have made probably 400 billion on pre-tax-pre-provision profits and having raised more than 500 billion.” > > The third solvency definition is positive economic value of the banking entity. Here he also grants them solvency: “The system in my view clearly has positive economic value.” At least assuming that the governmental response allows them to function. > > Fourth up is whether or not the banks have a positive liquidation value. And here it is a quick no. And no surprise there. No buyers on the spot means low low prices. > > And fifth is the closely related question of if banks have _enough_ liquidity. Here he notes that this is an issue of confidence. In the absence of a run on them then yes they do. I disagree that liquidity is an issue of confidence. You can only paint a smiley face on a marginal situation and then only for a short period of time. Liquidity is an easily calculated number. The problem in the equation is the ability to cover bad debt with bankrupt CDS’s. That’s where the liquidation of companies like AIG come into play. They’re 2.7? trillion dollars in the hole of which they’ve recouped 1.2 trillion through liquidation of their own assets. There’s a lot of smoke between bad banking debt (risk) and bad insurance coverage. > [@DSeid](#): > > It may be that declarations of insolvency are a bit premature. Or not, depending on the definition you choose. Which one do you believe is most important and why? How would you differ with the above analysis and on what basis? > > Moving along. Given that your concern, relevant to this thread’s op anyway, was how banks’ alleged certain impending insolvency is locking up the flow of money (“Because the answer is no we don’t have the liquidity to borrow money for manufacturing, purchase those goods, or buy new houses.”) why is not lending volume the key metric for you? Lending volume is an indication that “something” positive is happening but it is not an indicator of total solvency. It’s like saying the control structure of a dam has been opened up to allow water to flow but it doesn’t address how much water is needed to hydrate the farms down steam. Any water is a good sign but it doesn’t mean we’ve established equilibrium, which is another way of saying we haven’t bottomed out. ---
**Author:** ![Dangerosa](https://avatars.discourse-cdn.com/v4/letter/d/22d042/32.png) [@Dangerosa](https://boards.straightdope.com/u/Dangerosa)\ **Post date:** [April 5, 2009, 1:18pm UTC](https://boards.straightdope.com/t/have-we-hit-bottom-yet/491894/25 "2009-04-05T13:18:07Z")
> [@spoke-](#): > > The mortgage crisis is just part A. The credit card crisis (part B) [still looms ahead](http://www.reuters.com/article/Finance08/idUSTRE4AC8PU20081113). Since that article, credit card companies got scared and have been taking steps to drastically change their balance sheets. Interest rates have gone up, credit limits cut - it may not be enough to stop more failures, but it might not be as bad as it would have in November. ---
**Author:** ![Dangerosa](https://avatars.discourse-cdn.com/v4/letter/d/22d042/32.png) [@Dangerosa](https://boards.straightdope.com/u/Dangerosa)\ **Post date:** [April 5, 2009, 1:21pm UTC](https://boards.straightdope.com/t/have-we-hit-bottom-yet/491894/26 "2009-04-05T13:21:59Z")
> [@Magiver](#): > > All businesses are subject to audit by independent accounting firms. The only time I ever experienced an audit I was amazed at how detailed the questions were and I was only a mirror to my company’s accounting department. I found myself in the middle of what I thought to be niggling bullshit (less than $1000 audit items). We’re talking about billions of dollars within individual financial institutions. It means that every loan is assessed for risk and is then posted against the balance sheet. Just for information, auditors sample. Under a normal bank audit two years ago every loan would not be assessed. Loans that are atypical for the portfolio would be assessed. And typical loans would be sampled and assessed. An auditor may choose to dig into more detail if there is sufficient risk to balance the cost of the audit (which I would think likely when auditing bank loan departments right now) or if after the sample is taken, the situation looks suspicious (which I would also think would be likely now). ---
**Author:** ![DSeid](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dseid/32/20194_2.png) [@DSeid](https://boards.straightdope.com/u/DSeid)\ **Post date:** [April 5, 2009, 1:58pm UTC](https://boards.straightdope.com/t/have-we-hit-bottom-yet/491894/27 "2009-04-05T13:58:15Z")
So **Magiver** let me see if I got your answers right … You believe that any major accounting firm has the expertise to put a value and a risk assessment on various assets and debts that the banks hold; this is no different a situation than any other audit - plug and chug. No comment on whether to value them at immediate liquidation prices or as long term holds (to maturity or default) or something other. No answer as to what you use as the relevant definition of solvency or why. A comment instead offered up about how you believe that “enough liquidity” (the bit in which confidence was at issue) is not related to confidence. Lending volume increasing wouldn’t mean anything to you until you are somehow convinced that volume is sustainably high enough to have reached [a new] “equilibrium”. Which to me both sounds like a definition not of having bottomed out but of having completed a recovery and at the same time impossible to have a metric for. And as for the original questions of the thread: no you do not believe that we have bottomed out; and the only metric you’ll believe or that you believe matters is an independent audit of banks proving that they are “solvent.” Or maybe (?) looking back from a distant vantage point. Does that cover it? ---
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [April 5, 2009, 3:21pm UTC](https://boards.straightdope.com/t/have-we-hit-bottom-yet/491894/28 "2009-04-05T15:21:10Z")
Many have claimed that the bailouts will pay off for us in the long run. Last October. when we bailed out for 350 billion dollars ,we were told we would get much of it back if the stock prices went back up. We were pretty well assured that would happen. We demanded that we could sell the shares at whatever the price was at any given day. However Subsidyscope noted that Paulson allowed a footnote that results in our pegging the price to an earlier date. If so, the people will sell at a lower price. That costs the taxpayers billions. We just keep giving taxpayer money to the financials. Two lessons here. Subsidyscope is an on line group of accountants who read the agreements line by line. The net sites actually do reporting that the mainstream does not. The 2nd is that the bankers really want to keep sticking it to the taxpayers. ---
**Author:** ![Paul\_in\_Qatar](https://avatars.discourse-cdn.com/v4/letter/p/ccd318/32.png) [@Paul\_in\_Qatar](https://boards.straightdope.com/u/Paul_in_Qatar)\ **Post date:** [April 5, 2009, 4:00pm UTC](https://boards.straightdope.com/t/have-we-hit-bottom-yet/491894/29 "2009-04-05T16:00:01Z")
> [@Evil\_Economist](#): > > Some charts that people reading this thread may find interesting: > > [ul][li][Unemployment](http://4.bp.blogspot.com/_pMscxxELHEg/SdYIJE4z_SI/AAAAAAAAE-Y/jyjTsVT6djg/s1600-h/EmploymentComparingRecessionsMar09.jpg);[/li] > [li][Involuntary part-time workers](http://1.bp.blogspot.com/_pMscxxELHEg/SdYMhTI73cI/AAAAAAAAE-o/-BYy8IpOmQs/s1600-h/PartTimeMar09.jpg);[/li] > [li][Office vacancy rates](http://1.bp.blogspot.com/_pMscxxELHEg/SdVjlYjQC5I/AAAAAAAAE-I/vNexSVVZ0q8/s1600-h/OfficeVacancyRateQ12009.jpg);[/li] > [li][Stock market returns](http://dshort.com/charts/bears/four-bears-large.gif)[/li] > [li][Construction spending](http://4.bp.blogspot.com/_pMscxxELHEg/SdN1h6GPK4I/AAAAAAAAE9A/bcIsmzdrF_Q/s1600-h/ConstructionSpendingFeb2009.jpg);[/li] > [li][House prices](http://2.bp.blogspot.com/_pMscxxELHEg/SdJmnBvxC7I/AAAAAAAAE8g/hfFuxVeSq8E/s1600-h/SanFranciscoTierPricing.jpg)[/li][/ul] > Nothing to give much hope in any of the above. Wonderful post. Where is it from? (Remember I am an Old Person.) ---
**Author:** ![Spoke](https://avatars.discourse-cdn.com/v4/letter/s/a88e57/32.png) [@Spoke](https://boards.straightdope.com/u/Spoke)\ **Post date:** [April 5, 2009, 5:45pm UTC](https://boards.straightdope.com/t/have-we-hit-bottom-yet/491894/30 "2009-04-05T17:45:34Z")
> [@Dangerosa](#): > > Since that article, credit card companies got scared and have been taking steps to drastically change their balance sheets. Interest rates have gone up, credit limits cut - it may not be enough to stop more failures, but it might not be as bad as it would have in November. That may help the banks’ bottom line, but it also feeds into a deflationary spiral: people’s credit gets limited, they stop spending. People stop spending, stores and manufacturers go out of business. Stores and manufacturers go out of business, people lose jobs. People lose jobs, they stop spending. _Etc._ ---
**Author:** ![DSeid](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dseid/32/20194_2.png) [@DSeid](https://boards.straightdope.com/u/DSeid)\ **Post date:** [April 5, 2009, 6:18pm UTC](https://boards.straightdope.com/t/have-we-hit-bottom-yet/491894/31 "2009-04-05T18:18:31Z")
**gonzomax** , just a quick thank you for the point to [Subsidyscope](http://subsidyscope.com/). A lot of data collected there! The bit you refer to is, I presume, this? And following a link, [this?](http://subsidyscope.com/projects/bailout/tarp/warrants/calculation/) > [@](#): > > On Oct. 14, 2008, Treasury announced in the program term sheet that the strike price would be based on the average price of a company’s shares over 20 days prior to the time of issuance — the date the transaction was closed. In fact, contracts show that the strike price was based on the 20-day period prior to the date the company applied for TARP funds — a difference of weeks in many cases. Many stocks declined in value during that time, meaning that the government often paid more for the warrants under the revised terms. > > The discrepancy affects only a small portion of the overall subsidies associated with TARP and has no impact on the subsidy estimates presented on the Subsidyscope Web site since the estimates are based on the actual strike prices used in the contracts. Moreover, Treasury’s decision to use the application date instead of the issue date probably makes more sense from an administrative perspective. Still, the confusion surrounding Treasury’s strike price calculations has led to misunderstandings about the program. > [@](#): > > … had Treasury used the alternative strike prices in the contracts, the aggregate subsidy costs of the TARP program would have been only slightly lower. The warrants provide only a small fraction of the TARP subsidies; most of the subsidies are actually channeled through the government’s purchases of preferred stock. … If the issue dates had been used, neither Treasury nor the bank receiving TARP funds would have known the exact terms of the warrant until 4 pm on the day before the contract was signed, which would have limited the amount of time that Treasury and bank staff had to review the terms of the contract. More deals could have fallen apart at the last minute (which would have raised overall administrative costs of the TARP program), and some institutions might have been deterred from seeking TARP money, which would have undermined the goals of the program. > > Nevertheless, inconsistencies in the documents that the Treasury Department uses to describe TARP to the public highlight a need for government officials to improve their communication about the program and reduce misunderstandings. Miscommunications from the government have consequences … Not quite sure they are saying what you seem to think they are saying. ---
**Author:** ![Magiver](https://avatars.discourse-cdn.com/v4/letter/m/4491bb/32.png) [@Magiver](https://boards.straightdope.com/u/Magiver)\ **Post date:** [April 5, 2009, 6:42pm UTC](https://boards.straightdope.com/t/have-we-hit-bottom-yet/491894/32 "2009-04-05T18:42:39Z")
> [@Dangerosa](#): > > Just for information, auditors sample. Under a normal bank audit two years ago every loan would not be assessed. Loans that are atypical for the portfolio would be assessed. And typical loans would be sampled and assessed. An auditor may choose to dig into more detail if there is sufficient risk to balance the cost of the audit (which I would think likely when auditing bank loan departments right now) or if after the sample is taken, the situation looks suspicious (which I would also think would be likely now). Samples are taken to verify banking standards. If the samples suck then more are taken until they can prove accuracy. ---
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [April 5, 2009, 11:57pm UTC](https://boards.straightdope.com/t/have-we-hit-bottom-yet/491894/33 "2009-04-05T23:57:51Z")
> [@DSeid](#): > > **gonzomax** , just a quick thank you for the point to [Subsidyscope](http://subsidyscope.com/). A lot of data collected there! The bit you refer to is, I presume, this? And following a link, [this?](http://subsidyscope.com/projects/bailout/tarp/warrants/calculation/)Not quite sure they are saying what you seem to think they are saying. Actually the averaging of 20 days on the way down had the taxpayers pay more than it would have paying the price of the 20th day. But when we sell them, assuming we will when the market is climbing, our strike price will not be at its peak, but at a smeared price of 20 previous prices. We will get less . At no time do we get full value. The footnote was stuck in to hose the tax payer and drop more money into the pockets of financial pros who are responsible for the mess. ---
**Author:** ![DSeid](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dseid/32/20194_2.png) [@DSeid](https://boards.straightdope.com/u/DSeid)\ **Post date:** [April 6, 2009, 2:20am UTC](https://boards.straightdope.com/t/have-we-hit-bottom-yet/491894/34 "2009-04-06T02:20:39Z")
Assuming that a 20 d rolling average as a price will automatically result in a lower sales price than you’d get trying to time the top of market is an odd assumption to make. The Fed would be an odd investor indeed to sell while momentum was in rapid ascent. I’d also have little expectation that these companies will be hitting any rapid ascent phases. Some spikes up with good news and as investors become more confident but otherwise a long stretch of gradual ups with occasional down periods seems more likely - if we are optimistic hitting strikes in a few years and selling them off gradually “in the money” over the next few years after that. ---
**Author:** ![Dangerosa](https://avatars.discourse-cdn.com/v4/letter/d/22d042/32.png) [@Dangerosa](https://boards.straightdope.com/u/Dangerosa)\ **Post date:** [April 6, 2009, 2:42am UTC](https://boards.straightdope.com/t/have-we-hit-bottom-yet/491894/35 "2009-04-06T02:42:45Z")
> [@spoke-](#): > > That may help the banks’ bottom line, but it also feeds into a deflationary spiral: people’s credit gets limited, they stop spending. People stop spending, stores and manufacturers go out of business. Stores and manufacturers go out of business, people lose jobs. People lose jobs, they stop spending. _Etc._ I think this is a reset. We have to get to a sustainable level of spend - one that is not funded by credit cards or a housing bubble. So that deflationary spiral is part of the longer term cure - and easy consumer credit is part of the long term problem. Continue easy access to credit and you have bank failures and deflationary cycle. Tighten consumer credit and you might prevent (or soften) one of these events. ---
**Author:** ![Magiver](https://avatars.discourse-cdn.com/v4/letter/m/4491bb/32.png) [@Magiver](https://boards.straightdope.com/u/Magiver)\ **Post date:** [April 6, 2009, 3:03am UTC](https://boards.straightdope.com/t/have-we-hit-bottom-yet/491894/36 "2009-04-06T03:03:08Z")
> [@DSeid](#): > > So **Magiver** let me see if I got your answers right … > > You believe that any major accounting firm has the expertise to put a value and a risk assessment on various assets and debts that the banks hold; this is no different a situation than any other audit - plug and chug. > > No comment on whether to value them at immediate liquidation prices or as long term holds (to maturity or default) or something other. > > No answer as to what you use as the relevant definition of solvency or why. A comment instead offered up about how you believe that “enough liquidity” (the bit in which confidence was at issue) is not related to confidence. It’s not hard to rate a loan. Percentage of down payment, current value of house, personal income, personal debt ratio etc… You act like this is something magical or difficult. Bad loans exist because some banks deiberately made them, purchased them in poorly rated bundles, a bursting housing bubble, or a rise in unemployent. It doesn’t matter how the loan got on the books, it just matters that it is identified as well as the viability of the CDS backing up it’s failure. > [@DSeid](#): > > Lending volume increasing wouldn’t mean anything to you until you are somehow convinced that volume is sustainably high enough to have reached [a new] “equilibrium”. Which to me both sounds like a definition not of having bottomed out but of having completed a recovery and at the same time impossible to have a metric for. > > And as for the original questions of the thread: no you do not believe that we have bottomed out; and the only metric you’ll believe or that you believe matters is an independent audit of banks proving that they are “solvent.” Or maybe (?) looking back from a distant vantage point. > > Does that cover it? When [accounting rules are changed](http://www2.tbo.com/content/2009/apr/04/bz-new-accounting-rule-gives-banks-wiggle-room-in-/news-money/)so banks can reclassify debt then the idea of transparency goes out the window. It’s tough to recognize what is bad debt under these conditions. If you watched Geitner on Face the Nation today he couldn’t be pinned down to anything but he did throw this out: **GEITHNER: Well, Bob, what I say is there are encouraging signs. But again, it took us a long time to get here. It is going to take some time for us to work through this. Progress is not going to be even. We’re going to have fits and starts. There is going to be a period where it is going to feel very bad still and very uncertain. And that’s again why it’s so important that we just keep moving.** ---
**Author:** ![Spoke](https://avatars.discourse-cdn.com/v4/letter/s/a88e57/32.png) [@Spoke](https://boards.straightdope.com/u/Spoke)\ **Post date:** [April 6, 2009, 4:53pm UTC](https://boards.straightdope.com/t/have-we-hit-bottom-yet/491894/37 "2009-04-06T16:53:56Z")
> [@Dangerosa](#): > > I think this is a reset. We have to get to a sustainable level of spend - one that is not funded by credit cards or a housing bubble. So that deflationary spiral is part of the longer term cure - and easy consumer credit is part of the long term problem. Continue easy access to credit and you have bank failures and deflationary cycle. Tighten consumer credit and you might prevent (or soften) one of these events. I don’t disagree. My point is simply that we are not at the bottom (IMHO). There is unwinding yet to be done. ---
**Author:** ![DSeid](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dseid/32/20194_2.png) [@DSeid](https://boards.straightdope.com/u/DSeid)\ **Post date:** [April 10, 2009, 8:04pm UTC](https://boards.straightdope.com/t/have-we-hit-bottom-yet/491894/38 "2009-04-10T20:04:20Z")
**Magiver** , as much as I may feel that the declarations of bank insolvency were premature, [these declarations](http://www.time.com/time/business/article/0,8599,1890560,00.html) also seem a bit too early to make. > [@](#): > > the idea that banks are insolvent and probably in need of nationalization is no longer part of the consideration of how the problems with the system will be settled. BTW, subsidyscope still needs to get its bugs out. They have GMAC warrants listed as being in the money by 86000%! (Surely it aint, is it?) ---
**Author:** ![msmith537](https://avatars.discourse-cdn.com/v4/letter/m/d9b06d/32.png) [@msmith537](https://boards.straightdope.com/u/msmith537)\ **Post date:** [April 12, 2009, 12:07am UTC](https://boards.straightdope.com/t/have-we-hit-bottom-yet/491894/39 "2009-04-12T00:07:31Z")
> [@DSeid](#): > > So **Magiver** let me see if I got your answers right … > > You believe that any major accounting firm has the expertise to put a value and a risk assessment on various assets and debts that the banks hold; this is no different a situation than any other audit - plug and chug. They have the expertise, but that’s not what they do during an audit. The audit just validates that the companies accounting practices are being performed according to GAAP guidlines. They aren’t looking at the company in terms of performing a valuation on it’s assets nor are they investigating specific instances of fraud. In other words, it’s a mistake to assume that just because Ernst & Young signed off on their audit that the company is free and clear from all potential financial trouble. Also, does anyone remember a little Big-5…er Big4 firm called Arthur Andersen? ---
**Author:** ![FoieGrasIsEvil](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/foiegrasisevil/32/16638_2.png) [@FoieGrasIsEvil](https://boards.straightdope.com/u/FoieGrasIsEvil)\ **Post date:** [April 12, 2009, 12:22am UTC](https://boards.straightdope.com/t/have-we-hit-bottom-yet/491894/40 "2009-04-12T00:22:48Z")
I heard a radio advertisement today on my way home from work that GM (well, Chevy) was offering some program to potential car buyers that included a proviso that if the buyer lost their job after buying a new Chevy, GM would pay their car payment for up to nine months at a cap of $500 per month. How in the hell is this a workable solution for a near bankrupt, government-teat suckling company? Excuse me while I go buy a Corvette… [Previous page](https://boards.straightdope.com/t/have-we-hit-bottom-yet/491894.md?page=1) [Next page](https://boards.straightdope.com/t/have-we-hit-bottom-yet/491894.md?page=3)