Time to Buy a Home in River Oaks

Amanda and I were driving around town this weekend when I heard a news clip on the radio that quoted Timothy Geithner as saying the financial companies are getting stronger because the credit markets are clearing up and getting stronger. All of a sudden a light bulb clicked on in my brain as I realized for the first time that I could afford a home in River Oaks and so can you. Here's how you do it.

Pull together all of your financial data--assets, liabilities, sources of income, etc. Take your liabilities and magically convert them to assets. If you need an example, refer to the episode of The Office where Michael Scott "declares" bankruptcy (if you don't get this, you really need to start watching The Office). Now, take your assets and increase their value ten-fold. For instance, I have a 1999 Toyota Camry with 220,000 miles on it and a giant dent on the passenger side. My most optimistic guess at its true resale value is about $1000, but that's not nearly good enough to buy me a River Oaks home. So, I'm just going to adjust my books so that it's value is $10,000. Next, I'll take my current home and multiply its value by 10 making it worth well over $1 million. Of course, I'm not considering the outstanding mortgage on it as a liability because I've already converted that liability to an asset. I'll do this little exercise with all my assets and liabilities. I think that should bring my new net worth to somewhere in the $2.5 million range, enough to buy a decent home in the River Oaks area...or at least on the outskirts of River Oaks.

Now, I can feel your skepticism for my plan and ordinarily you would be correct in thinking I'm out of my mind. However, what I have described above is no different than what the banks are doing with the federal government's permission. I've mentioned the mark to market accounting rules several times in other posts. What the federal government has done is tell the banks, "We know you have billions and billions of toxic "assets" on your books in the form of default credit swaps and subprime mortgages. We know that even though we call them "assets" they are really liabilities because if those subprime borrowers default on their loans, and we all know they will, not only do you not get paid back, but the home serving as collateral for that mortgage is worth less than the outstanding balance of the mortgage so that you lose money. But, we really need the American people to believe that our financial system is strong. So, next time you go to balance your books, consider your subprime debt holdings to be assets, and even though those assets have no value because no investor in his/her/its right mind would purchase those "assets" from you, give them a "value" of your choosing so you can claim quarterly gains when you report to shareholders."

So, when I take my little plan to the bank to get a mortgage to buy my new River Oaks home and the loan officer tells me I don't have enough money to buy my dream home, I will simply tell him or her that it's all a matter of perspective. If his bank gets to value its assets any way it pleases, thereby deceiving its investors regarding the true value of the bank, then I should be able to value my assets any way I please in order to get the bank to invest in my dream of owning a River Oaks home. That seems fair to me. What do you think?