M Maund is a little confused-he speaks of poor

mortgagees-mortgagees are lenders, mortgagors

are borrowers.

This is a common mistake in Australia where

literacy is at a low level

r.l.b. Richards, beaumont , n.s.w. Australia

One cannot base an economy on fictitiious money that can be digitally created and financially engineered to suit those who issue endless credit to their, hitherto, immense financial gain for ever. A day of reckoning has to come to protect those being exploited by by the mortgage - financing credit machine that basically renders most ordinary citizens as financial slaves to the system more effectively than any formal dictatorship. It would give me immense pleasure to see this entire corrupt hgouse of cards collapse and the banks (and their major shareholders) get nothing back from the poor nortgagees who have been compelled by the systenm to take on unreasonable debt to merely buy a property to live in.

Nigel Maund, Perth, Australia

Isn’t it always reassuring that no matter what the problem that seems to surface in the US financial arena, it is always completely fixed in the matter of a couple of days? After all, what’s a few billion here and a few billion there and a few billion everywhere especially when the Fed stands ready with its partner at Treasury to just create more billions. I saw somewhere among the various emails that cross my inbox daily that our clever community has figured out that M3 is increasing at a rate of nearly 18% per year! That is mind boggling. All I can tell you is that I know plenty of folks, myself included, who wish we had the capacity to create all the money we need out of thin air. It sure would make financial matters disappear as the source of many a marital problem wouldn’t it? Perspective of Dan Norcini

Phil, Louisville,

It will be a satisfying relief to have such an important part of our economy being honest with the public for a change! The truth will out, sometimes! Now if the government were made to follow the U.S. Constitution it would be even better! Our elected idiots might try being honest too!!!! We are in one terrible economic mess and about 90% of the people (sheeple) realize it or even care! Keep your powder dry because it is a dangerous envioremen we are living in!
John in Mt Sterling, Ohio

J.L. Galbreath, Mount Sterling, OHIO

My view is that it if banks want to invent financial instruments that have no intrinsic value and then create models which permit them to assign any value they wish to these assets, then they should be perfectly at liberty to do so. But obviously if a bank has a computer entry registering a derivative valued by the bank at (for the sake of argument) 1 trillion dollars which neither is based on an existing physical asset , nor or which there are any buyers, then obviously the public should be aware of this fact. The public must be aware of which parts of a bank's balance sheet are based on supply and demand and which on fantasy and wishful thinking. In the last analysis, we cannot run an economy, let alone a society, without knowing which statistics are grounded in reality and which have been conjured up out of thin air.

james, vienna,

I have to chuckle when I see people discounting an article like this out of hand; when all the evidence is staring you in the face that maybe one should wake up and smell the coffee. The way I see this is like a financial tsunami the will catch 95% of the people with their proverbial pants down and 5% will have prepared for it.

Dennis Ott, Calgary,

Should the credit and banking crisia worsen, I see a replay of what happened with the S & L crisis. The government will set up a new agency, much as they did to dispose of the assets of failed S & L's. The government is always keen to set up a new agency. William Seidman headed up the S & L bailout agency. Those assets were sold off at ridiculously low prices. The same thing will happen again, whether levels 1, 2 or 3. The final bill will be presented to the U. S. taxpayers, as it was with the S & L bailout. At that time Seidman said it would take 30 years for the taxpayers to fully pay the bill. This time it might take 75 years. But who cares? No one much cares about future obligations, certainly the lenders didn't when they made loans. In any case, we are beyond the point of fixing blame. When the new agency is created to sell off all the level 1, 2 and 3 debt, everyone will breathe a sigh of relief, thinking by putting even more debt off into the future the problem will be solved.

Robert Greenwood, Las Vegas, Nevada USA

Frankly, it seems to me that no one should buy such assets absent a huge discount. I would not characterize this as "feeding on bones" as Mr. Lomax does. I would simply point out that the risk of such assets is huge, and, up until recently, foolish investors were accepting high levels of risk at very low prices. The so-called "sharks" are merely insisting that, if they are to invest in this potentially toxic waste paper, it must be worth their while, and they must be paid for the potential defaults.

Jim Craig, San Francisco, CA

Rees Mogg published two books, Blood on the Streets (1988) and The Great Reckoning - Protect yourself in the coming Depression (1993!). Both were unrelentingly negative. Markets experienced their best ever periods afterwards.

He simply has no credibility with anyone. Why does the Times continue to give him a platform?

William David, Winchester,

editorialstaff net notes: The sharks refuse to buy any subprime debt due to self interest, even if the global economy is destroyed. They want a Nov 15 bloodbath/feast upon the bones of major vulnerable houses. Their lust for obscene profits, as they get ready to disjoint whichever large financial players that are upended by the requirement to mark to market, is itself obscene, if predictable. There is little hope of less cutting solutions, when greed works so well, for the sharks. They, the buyer side of the market, are simply waiting to buy the assets of the poorly managed firms with the worst exposure at impossibly low prices, and will not make a market until their billions of pounds of flesh, in the form of near free securities, has been sated. It was greed that caused the vulnerable firms to embrace the risky securities, and it is greed that will put their assets into stronger hands. Free markets thrive on such corrections of unwise choices. I still hope it is for the best.

Franklin D. Lomax, Alexandria, Virginia, USA

This is too technical for me, but I get the sense that it is the level two assets that are the real problem with these new regulations.

Henry Percy, London, UK

DS is not right. Fed Chief Bernanke was never associated with Goldman Sachs. Mr. Bernanke was an academic, the Chairman of Princeton's Economics Dept., before he joined the Federal Reserve. He is not a fox and was not in the "hen house."

Mark Mulligan, Shepherdstown, West Virginia

Respectable banking houses? There are none. The banks are the robber barons of the 21st century. There's no doubt in my mind that the majors constitute a cartel - but are far too smart (or influential) to be caught by the regulators. They have made it impossible for commerce and even private life to exist wihout recourse to their services - for which they charge whatever takes their fancy.
My ambition is to go to my grave owing the banks as much as I possibly can. And I'm glad to report that I'm doing quite well so far.

Tony Jones, Grantham, Lincs

The final call is with the accounting firms auditing the accounts. It is they that have to be able to agree with the interpretation the bank puts on its listings. So this has a long way to go yet. It will be at least another year before we get even a realistic picture of the value of assets. We need to remind the auditors that they must recognise their responsibility to instruct the banks to reveal the truth.

Chris Coles, Medstead, Alton, United Kingdom

This article is disingenious. It submits a subtle premise that regulation is the problem, while exactly the opposite is. The fact that banks have been allowed to write "models" to value illiquid assets, and move these assets around anyway they wish, is nothing more than a shell game to avoid losses and keep huge bonuses for themselves. This Enron/WorldCom style of accounting sent executives to prison in the non-banking sectors, but is allowed here. This will all end very badly. There's a good reason why foxes shouldn't be in the hen houses, and allowing Ben Bernanke and Hank Paulson, both of Goldman Sacks, to have regulatory oversight of banking is tantamount to insider trading and complete conflict of interest. For all their bumbling, the only effect will be to delay the inevitable fall. Investors beware, the foxes are eating the chickens.

DS, Waimea, HI

J Hewitt Smith: "How can you say in the same article that this reform should have been introduced years ago and then that it is a historic regulatory blunder?"
Because timing is everything!

Frederick Davies, Oxford, UK

J Hewitt Smith, Surbiton, UK

"How can you say in the same article that this reform should have been introduced years ago and then that it is a historic regulatory blunder?"

Well this could be a consistent position if one believes that circumstances have changed, and that, unlike a few years ago, to introduce this reform now will cause such mayhem in the markets that it is no longer an acceptable thing to do. I have sympathy with this argument, as long as there is also recognition that it is absolutely imperative that the financial sector accepts, develops and implements fair-value accounting over a period that is no longer than that required to allow this to take place without an unacceptable level of disruption.

Simon Stephenson, Windermere, UK

I don't agree that Pensions disclosure has turned out to be a good thing. My company (a large corporate) has gone from a large deficit to a large (£200m) surplus and back to deficit (as a result of de-risking and a change in mortality assumptions) over the last 3 years. Pension valuations are just an accounting number, which don't actually reflect a best estimate of the position of the scheme and as such they create immense volatility - our 2006 surplus is just as meaningless as our 2005 deficit. And so I worry that FAS157 will, like many other fair value standards, detract from the ability of banks and other corporates to manage their businesses effectively.

Betsy, Hampshire,

How can you say in the same article that this reform should have been introduced years ago and then that it is a historic regulatory blunder?

J Hewitt Smith, Surbiton, UK

A partial truth, intended to deceive, is a lie. In all things, the truth is always better than a lie. There are no white lies; all lies are black. In regards to money - my money, all of the above applies. It should apply to your money too.

Dave Heller, Alexandria, Virginia/USA

Similar things were said about the UK pension accounting standards, but I doubt if anyone would now regret the much better level of transparency and the revelations of underfunded schemes that resulted from them, notwithstanding the major downgrading of many schemes that resulted. It is not in the interests of honest financial traders to have had such secrecy surrounding banking schemes. No doubt there have always been rogues but this time the most respectable banking houses seem to have been tainted by a belief that gravity can indeed be defied while huge bonuses are in play. The pursuit of profit is one thing, lemming-like self-deception is quite another. As with pensions, asset classification will bring an overdue clarification of the real state of affairs. Painful, but clearly necessary.

Colin , Shrewsbury,