- Why does Schwartzman blame accountants as another set of culprits behind all the pains in the US financial industry arising from the 2008 global financial crisis? Do you share his views? Why?
2. It is suggested in the case that the (Fair Value) rule forces banks to mark their assets and liabilities to market, rather to some theoretical price calculated by a computer – a system often derided as “mark to make-believe.”
– What valuation practice by banks is referred to as the “mark to make-believe”? Why is it called as such?
3. What is the ‘sub-prime’ crisis? Why is it called “sub-prime”? How did the sub-prime crisis affect US banks? Do you think Australian banks might also have been exposed to the ‘sub-prime’ issue?
What do you know about Collateralized Debt Obligations (CDOs)? How did Fair value measurement system affect their valuation by banks? Do you believe that Fair Value measurement system contributed to the banking crisis? Why?
Mr. Schwartzman argued that “the market is somehow wrong or wildly inefficient”. Why did he make such comment? Did the US capital market efficiently price the CDO’s? What does it say about the capital market?