Finance prof: No passing grade yet for rescue plan

Not a passing grade yet.

That's Andy Winton's view of the plan Treasury Secretary Henry Paulson has been pushing to get the credit markets functioning well again — at a cost to taxpayers of up to $700 billion. Winton chairs the Finance Department at the University of Minnesota's Carlson School of Management.

Winton, says the plan needs more congressional oversight. He also says taxpayers should be given a stake in the financial institutions that will be rescued by the plan. Such a provision would reflect the strategies legendary investor Warren Buffett employs in taking positions in companies.


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The end of an era – A year that changed Wall Street forever

2008 will go down as the year that Wall Street changed forever. Bear Stearns, Merrill Lynch, and Lehman Brothers have disappeared from the financial landscape as standalone entities. The U.S. government now owns Fannie Mae and Freddie Mac, and recently added American International Group to its burgeoning portfolio of financial basket cases.

The remaining large broker dealers Goldman Sachs and Morgan Stanley have applied for and received approval to become bank holding companies. This means they will now become commercial banks. In other words, they will be able to take in deposits and thus not be so vulnerable to the cost of borrowing in the wholesale money markets.

The credit crisis has changed the financial landscape on Wall Street forever, and these changes will continue as the surviving participants continue to maneuver (with the help of the Treasury and the Fed) to remain competitive.

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ASF, SIFMA Oppose 'Q' Elimination

The ink is barely dry on the Financial Accounting Standards Board's proposal to eliminate the use of the qualified special purpose entity as a means of segregating assets off balance sheet, but industry critics are already appealing to Congress in an effort to avoid the measure.

FASB in April agreed as part of these rewrites to eliminate QSPEs, an accounting device that has come under much criticism over the past several years, with critics saying the practice has contributed to corporate scandals such as Enron by allowing losing or volatile positions to be obscured.

FASB Chairman Robert Herz himself has placed his full clout behind the proposed elimination of the ‘Q' as part of the board's rewrite of FAS 140 and FIN 46R, connecting QSPEs to the sub-prime mortgage crisis and stating pointedly that the vehicles into which riskier loans had been packaged were “ticking time bombs.”

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Are we heading into a new Great Depression?

When the United States puts together the largest financial rescue plan since the Great Depression to bail out its investment banks, people get worried.
So it seems natural that after last week’s devastating blow to Wall Street, where the stock market plunged to the lowest it’s been in a decade, there are fears the Canadian economy might suffer too.

Some experts are saying that the world could be heading into the worst financial situation since the global market crash of 1929, and that’s leaving Ryerson students unnerved.

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