【正文】 of: investors, mortgagebacked securities, other derivatives, loan originators, banks and other financial institutions。 ? Fool me once, Shame on you。 Fool me twice, Shame on me. [Chinese Proverb]. 61 TRANSPARENCY ? Transparency of activities is reflected in (but is not limited to) information disclosed in financial statements ? This information must, moreover, address a great variety of inputs ? One structured methodology for this can be in the form of the following “pseudoequation.” S = f (P4Q + P3Q + P2Q + PQ + P) Where: ―S‖ represents a degree of total satisfaction and symbols ―P‖ and ―Q‖ designate inputs, necessary to achieve this satisfaction TRANSPARENCY ? One may object that the earlier equation is not “real,” following logical and mathematical principles. Does this criticism refer to its “form” or to its “substance?” ? Mathematical symbols are merely shorthand for some basic truths, which, when fully written out in text, appear more plex and take up more space. ? This equation, therefore, is at least as valid, for this purpose, as many used by (say) economists, for their own purposes. Form might be valid – but substance is often very weak! [“Life39。s but a walking shadow, a poor player that struts and frets his hour upon the stage and then is heard no more: it is a tale told by an idiot, full of sound and fury, signifying nothing. Macbeth (Act V, Scene V).] INTERNAL amp。 EXTERNAL CONTROLS Price of Inputs Purpose Quantity of Inputs Questioning Capacity Pay Inputs Expenditure Permission Prestige Quality of inputs Productivity Probity Publicity Procedures Questing Intensity Power Production Characteristics of Activity ECONOMIC COMPUTATIONS ? While [economist] Walrus’s ideas were novel, what was truly revolutionary was his use of sophisticated mathematics borrowed from physics…..Walrus’s willingness to make tradeoffs in realism for the sake of mathematical predictability would set a pattern followed by economists over the next century. *“The Origin of Wealth”, Eric D. Beinhocker]. ? “The only function of economic forecasting is to make astrology look respectable….We must always remember that economists make forecasts not because they know, but because they are asked to.” [John Kenh Galbraith] FULL DISCLOSURE ACCOUNTABILITY Potential Investors in the “” Search for its Initial Capitalization: ? The more information they learned, about electronic book selling, the less likely they wanted to invest in it! [Jeff Bezos – Founder and CEO (CSPAN)]. 66 Potential Investors in Mortgagebacked Securities (Derivatives): ? The more information they learned, about these instruments, the less likely they wanted to invest in them! [An analogy to Bezos – borne out of the facts!]. “The financial statements have been prepared in accordance with standards for “Financial Reporting and Accounting for Unpriceble Derivatives” (FRAUD). “Therefore, using “Creatively Regulated Accounting Practices” (CRAP) we hereby certify that these financial statements represent a true and fair view of the state of affairs of the pany, as at the date of the balance sheet and of the activities for the year then ended. Arthur Underhand and Company Certified Public Accountants (Retired) Accountability [Model Financial Reporting Statement] 67 …viewing the financial world from an evolutionary perspective argues for weeding out what the political scientist Joseph Schumpeter called the hopelessly unadapted and quickly… …The experience [of Japan in the 1990s], Ferguson ments, stands as a warning to legislators and regulators that an entire banking sector can bee a kind of economic dead hand if institutions are propped up, despite underperformance, and bad debts are not written off. [emphasis added] Shelby Coffey III: Review of “The Ascent of Money”: Niall Ferguson 169。 Washington Post (Book World) Nov. 30, 2022. Accountability [Credible Financial Reporting] 68 Responsible and Accountable Activities ? Commentators, policymakers, evaluators and critics have invariably approached (almost) every issue by: ? establishing a preconditioned and prejudiced posture。 ? seeking and using evidence that supports this posture, whilst ignoring any evidence that does not。 and then, ? taking – or remending – action, without ever considering the total and overall economic, financial, fiscal and social consequences! ? This can be referred to as the KNEEJERK response: ? the [K]NEEDs are large, urgent and important。 yet, ? we are often satisfied to rely upon JERKS to deal with them! 69 Accountability “Fair Value Accounting is causing a large part of the problem at this moment…” Steve Bartlett, President and CEO Financial Services Roundtable Testimony to: . House of Representatives Financial Services Committee 18 November, 2022 70 Fair Value Accounting David C. Jones, CPFA, FCCA, had heard this statement, when listening to his car radio. He was so astonished that he nearly crashed into a tree! (Not believing his ears, he later needed to verify it from the CSPAN website, which carried the hearing of the US House of Representatives Financial Services Committee!) 71 Regulator Let IndyMac Bank Falsify Report [Agency Didn39。t Enforce Its Rules, Inquiry Finds] 72 ? A senior federal banking regulator approved a plan by IndyMac Bank to exaggerate its financial health in a May federal filing, allowing the California pany to avoid regulatory restrictions only two months before it collapsed, a federal inquiry has found. ? The same regulatory agency, the Office of Thrift Supervision (OTS), allowed similar legerdemain by other banks, according to a letter sent yesterday to members o