No Bailout, So Where’s the Market Crash?

After failing to pass the pathetic Wall Street bailout plan and a 700-point Dow plunge, the House takes a day off. So, much for the financial crisis. It seems to me if this was truly a crisis situation, the lawmakers would forgo their Rosh Ha-Shanah holiday. After all, the Jewish New Year is not a U.S. federal holiday (if it were, I’d be off). Anyway, it doesn’t appear their presence was really needed. The Dow bounced back today, recovering more than half the previous day’s losses.

Maybe, just maybe, we don’t really need this bailout. Let’s not kid ourselves, today’s resurgent markets weren’t driven by the bailout package, but the belief that a package will be passed by the weekend. However, I’m hoping it doesn’t. I’m hoping our lawmakers will consider other market stimulation options besides simply throwing money at it.

Newt Gingrich is recommending a suspension of the mark-to-market accounting rule that requires assets to be valued at current market prices. Mark-to-market accounting takes a short-term view of assets and fails to give financial institutions a chance to weather market stalls and impairments. Suspending this accounting rule would allow banks to use other accounting models to determine liquidity. Confusing? Consider this: You have ten dollars in one dollar bills. Your buddy, who isn’t known for making smart financial decisions, trades one of his dollar bills for two quarters. In light of this trade, the fair market value for a dollar is now fifty cents. Although you have traded nothing, your ten one dollar bills are only worth twenty quarters. Based on the mark-to-market accounting model, the current value of the money you hold is only five dollars. Suspending this rule would allow you to apply a different accounting model that could more accurately assess your current net worth, which is really ten dollars. (h/t Blogging Stocks)

Gingrich is also calling for eliminating the capital gains tax. Sounds reasonable. Tax-free capital gains would encourage investment and doesn’t cost the tax payer a dime! So, maybe we don’t need this bailout. Let’s consider other options. Let’s consider free market solutions. Let’s put the market to work instead of putting it on welfare.

MORE: Michelle Malkin; Hot Air: here, here and here; Webloggin; Power Line