Knowledge@W. P. Carey -- Finance and Accounting

The Economic Minute: Mark-to-Market Accounting

Fri, 01 May 2009 12:49:11 EST

The Financial Accounting Standards Board recently came out with new rules governing "mark-to-market accounting." Entities employing mark-to-market adjust the value of financial assets up or down, according to fair market value. The practice has been the subject of controversy during the current financial crisis. In this edition of The Economic Minute, John Sizer, a partner at Deloitte & Touche, tells Economic Club of Phoenix members that mark-to-market is not the problem.

The Economic Minute: Mark-to-Market Accounting

Fri, 01 May 2009 11:31:42 EST

The Financial Accounting Standards Board (FASB) recently came out with new rules governing "mark-to-market accounting." Entities employing mark-to-market adjust the value of financial assets up or down, according to fair market value. The practice has been the subject of controversy during the current financial crisis. In this edition of The Economic Minute, John Sizer, a partner at Deloitte & Touche, tells Economic Club of Phoenix members that mark-to-market is not the problem. "It is my personal opinion that the new FASB positions are helpful, that accounting standards are not the underlying cause of the write-down of financial assets but rather reflect the underlying problem with those assets," Sizer said. "Mark-to-market is not perfect, it requires significant professional judgment, but I believe it is the most accurate and reasonable portrayal of a company's financial condition."

The Economic Minute: The Changing State of Banking

Wed, 01 Apr 2009 13:19:39 EST

Hope Berman Levin, the regional president for U.S. Bank in Arizona, recently touched on some of the rapid-fire changes that are happening in banking, during a talk at the W. P. Carey School's 26^th Annual Dean's Council of 100 Executive of the Year Luncheon. Levin commented on new policies at the FDIC, interest rates, bank failures and the future of the industry. The Economic Minute, presented at Economic Club of Phoenix luncheons, brings you the insights of the school's economists and the business leaders who are members of the Economic Club of Phoenix and the Dean's Council of 100.

Podcast: Markets Await Detail of Rescue, Stimulus Plans

Wed, 11 Feb 2009 20:21:26 EST

Treasury Secretary Timothy Geithner announced the Obama administration's plan to rescue financial markets yesterday. The plan was long on promise and short on details, however, which sent markets spinning. Later in the day, the Federal Reserve stated it was ready to add $100 billion the TALF program, a move designed to increase consumer lending and invigorate the mortgage market. And, the Senate enacted its own version of the stimulus bill. Finance Professor and banking expert Herbert Kaufman sat down with Knowledge@W. P. Carey to discuss the events, starting with his reaction to Secretary Geithner's speech.

Tom McCabe: Asia Positioned for Post-Recovery Strength

Wed, 17 Dec 2008 15:27:48 EST

The pain of the newly-declared recession knows no boundaries, and the Asian economies are not immune, but that region is positioned to rebound faster than the U.S. and come out stronger than before, according to Tom McCabe, managing director of Standard Chartered Bank PLC. Speaking from the perspective of more than a decade in the banking industry in Asia, McCabe told an audience of executives in Phoenix that Asia will be the world's engine of growth in the next 50 years, driven by India and China.

The Devil's in the Details of the Financial Market Crisis, and He's Wearing a Green Eyeshade

Wed, 22 Oct 2008 17:50:41 EST

In the last month, financial markets came as close to collapsing as they have since the Great Depression, and the root of their woes was frozen credit markets. The crisis sparked several weeks of furious and futile improvisation by U.S. regulators and lawmakers. By early this week, the proposal -- nicknamed the Paulson plan after Treasury Secretary Hank Paulson -- appeared to be bringing relief, said financial experts at the W. P. Carey School of Business and in the investment business. Even so, only time will tell whether Paulson's plan can solve the underlying problems, the experts said. As always, the devil's in the details, and this time around, he's wearing a green eyeshade.

Grappling with a Global Confidence Crisis

Wed, 08 Oct 2008 18:46:56 EST

It's been called a crisis of confidence. It started with bad real estate loans and highly leveraged bets on those loans. Now it has frozen credit markets. Banks aren't lending to each other. Businesses can't get the short-term loans they need to finance day-to-day operations. If it stays this difficult to access credit, the financial crisis threatens to become a real economic one. And it's global. Welcome to what Thomas Friedman calls the "flat" new world.

Good Intentions, Iffy Choices Paved Road to Credit Crisis

Wed, 08 Oct 2008 18:46:56 EST

It's said the road to Hell is paved with good intentions, and some people sweating through the credit-market meltdown might agree. Underlying the wreckage are decades of regulatory and legislative decisions that opened the door to today's financial woes. Some policy choices were high-minded, some were deregulatory, and some just seemed like a good idea at the time. But, with passage of the Troubled Asset Relief Program (TARP), we're on the right track now, aren't we? Maybe not. According to Anthony Sanders, professor of finance at the W. P. Carey School of Business, TARP falls short as a deterrent to future financial troubles.

Paulson and Bernanke's Banking Bailout: The Devil's in the Details

Wed, 24 Sep 2008 13:44:32 EST

Within the span of a week, Treasury Secretary Hank Paulson and Federal Reserve Chairman Ben Bernanke have gone from saviors to Satans. First, their plan for bailing out failing financial companies and thus shoring up a shaky economy was heralded as overdue medicine for a fast-spreading and perilous financial flu. Then, within days, it came to be lambasted as a gift to their friends on Wall Street and a power grab by the Bush administration. Financial experts at the W. P. Carey School of Business say Paulson and Bernanke's plan is neither as divine as its early proponents claimed nor as dastardly as its detractors now allege. It is, they say, necessary to reassure skittish investors and bankers around the world. But as is so often the case when Washington meddles in markets, its ultimate success will depend on critical details that are still being hammered out.

Standards Deviations: U.S. Financial Accounting Heads for Change

Wed, 27 Aug 2008 16:54:52 EST

The U.S. Securities and Exchange Commission is moving to replace existing rules-based accounting standards with principles-based, international ones in filing requirements. IFRS are the international equivalent to Generally Accepted Accounting Principles (GAAP), which are the standards and rules auditors follow when preparing financial statements in the United States. Since 2005, companies in the European Union have been adhering to IFRS, a circumstance that some feel puts U.S. markets at a disadvantage globally, says Philip Reckers, professor of accountancy at the W. P. Carey School of Business. Among changes to come: Auditors will require dramatic retraining; accounting firms face different legal liability issues; and investors will likely see more footnote disclosures in corporate financial statements.

Beleaguered Fannie Mae and Freddie Mac: Beacons of Stability

Tue, 22 Jul 2008 11:56:04 EST

President Bush has signed into law a housing package passed by Congress last week that authorizes the Treasury Department to spend federal funds to rescue Fannie Mae and Freddie Mac if necessary. In recent weeks, there's been widespread concern that the mortgage giants, which own or guarantee about half of the nation's mortgages, might be on the verge of collapse. Finance Professors Herbert Kaufman and Anthony Sanders at the W. P. Carey School of Business suggest a very different picture. Rather than faltering, Fannie Mae and Freddie Mac have actually been "beacons of stability" in the mortgage crisis that has roiled U.S. financial institutions of all stripes.

Who Profits from IPO Underpricing?

Wed, 26 Mar 2008 14:31:57 EST

A firm going public relies on the capital raised in its Initial Public Offering to grow and thrive, but studies have found that IPOs in the United States are underpriced an average of 15 percent. Conventional wisdom has held that the gap is inevitable given the risks in taking public a young company that often has little or no track record. But W. P. Carey management professor Robert E. Hoskisson and researchers from three other U.S. universities challenge this assumption in an exhaustive analysis of 300 IPOs from the 1990s. The researchers applied agency theory -- a concept used to sort out the interests of owners and managers -- and concluded that underpricing of IPOs occurs because it is in the interests of some of the key players.

Financial Detectives: The Rising Demand for Forensic Accountants

Wed, 30 Jan 2008 17:18:46 EST

Like ripples from a pebble pitched into a pond, the federal law passed to combat white-collar crime has resulted in booming demand for the specialists who can comb through financial records and follow a trail of evidence. Once simply a component part of audit courses, forensic accounting is being offered as a standalone class at many colleges, including the W. P. Carey School of Business.

The Dollar: Down but Not Out

Wed, 21 Nov 2007 14:33:41 EST

The dollar has been in sharp decline in recent months -- the greenback is now worth less than the Canadian dollar, and against the euro, it has lost 60 percent of its value since 2001. A doomsday scenario has the U.S. economy spinning out of control: the dollar plunges, financial markets crash, and the Federal Reserve is powerless to halt the collapse since cutting interest rates would send the dollar down even further. But W. P. Carey experts Herbert Kaufman and Kent Hill believe that concerns of a dollar-triggered financial crisis are overblown.

Ties That Bind: The Connection between Fraud and Foreclosures in the Mortgage Market

Wed, 26 Sep 2007 13:23:06 EST

The public perception is that foreclosures mainly affect hardworking families who are hit with a payment reset or a trigger event such as a job loss. But Anthony Sanders, a professor of finance and real estate at the W. P. Carey School of Business, also sees evidence of "rampant fraud."

High Foreclosures but Low Bankruptcies: Why the Disconnect?

Wed, 12 Sep 2007 16:59:35 EST

Foreclosure rates have increased dramatically in the last year. Yet bankruptcy filings are much lower than they were before the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) went into effect. Experts at the W. P. Carey School of Business examine various factors that may be contributing to the gap and discuss possible policy responses.

Podcast: How the Fed Influences Credit Market Liquidity

Wed, 29 Aug 2007 16:57:33 EST

As the stock market continues to shake following the crash of the subprime market, all eyes are on the Federal Reserve. Now more than ever it's important to understand how the Fed works. For example, what is the federal funds rate and how does it differ from the discount rate? Here with a primer on how the Federal Reserve operates is Herbert Kaufman, professor of finance at the W. P. Carey School of Business.

Jumbo Woes in the Mortgage Market

Wed, 29 Aug 2007 16:59:43 EST

The meltdown of the subprime mortgage industry, often associated with the lower end of the U.S. housing market, continues to spread upward, bringing uncertainty into the jumbo mortgage loan market (loans above $417,000). Luxury home communities are impacted, but so are less fancy neighborhoods in cities such as Los Angeles, where mortgages on small homes occupied by middle income families fall into the jumbo category. At this point the severity and duration of the impact on the high-end market are still unknown. The surprise is how far the subprime contagion has already spread, say experts at the W. P. Carey School of Business.

Collect Calls: How the IRS Aims to Bring in More Money

Wed, 29 Aug 2007 16:57:33 EST

IRS officials estimate some $290 billion dollars that should have come into federal coffers in 2001 never made it into Uncle Sam's pockets. But, take heart. The IRS has a seven-component strategy for bringing in the bucks. In the second part of a series on the tax gap, Charles Christian, director of the School of Accountancy at the W. P. Carey School of Business, points to the agency's goal of expanding information-reporting vehicles as one change that might bring in a healthy payback.

Closing the Gap: Why the IRS Wants to Practice Random Acts of Audit

Wed, 15 Aug 2007 17:39:43 EST

According to IRS estimates, there is a $345 billion gross "tax gap" for 2001. The tax gap is the difference between taxes the IRS thinks should have been paid and taxes that actually were paid. Not surprisingly, "the tax gap is, on and off, seen as a revenue source," says Charles Christian, professor of accountancy at the W. P. Carey School of Business.