The day draws near to when Wells Fargo will decide if it is going to trigger a clause that would require Jackson Hewitt to make a substantial cash payment. The SEC appears to be taking an active interest in this issue.

In a January 11, 2011 letter, SEC Assistant Director Larry Spirgel sought answers to some specific questions that he felt were lacking in Jackson Hewitt’s March quarterly (more…)

The SEC will hold a forum to examine policy responses to concern about the role of ratings agencies in recent economic events. The forum will be held on April 15th in Washington, DC.

Many analysts have observed that ratings agencies were somewhat offbase in their assessments of the soundness of debt held by some of companies that experienced significant write downs in the credit crisis.

A significant point of discussion should ascertain how inherent conflicts of interest can be resolved.  In most instances (save for unsoliticed ratings) credit agencies are paid by the very institutions that they are rating. In a universe where the three dominant ratings agencies (Standard & Poor’s, Fitch Ratings, and Moody’s) compete for business, this leads to the potential for less-than-objective analysis.

Mood’s had Lehman’s debt rated at A2 prior to its collapse last fall. It had AIG’s debt rated at Aa3 prior to its bankruptcy filing.

The House of Representatives will hold a hearing on mark-to-market accounting, potentially as soon as next week, according to CNBC.

Leaders from the SEC and the FASB are going to testify.  Last January, the SEC issued a report calling for the continued use of mark-to-marketing accounting.  Specifically, they sought to defend FASB 157, the new wrinkle added in Nov. 2007.  That report sought to develop simplified ways of handling financial investments, particularly deriatives and distressed assets.

This could be the most positive, no cost to taxpayers solution out there.  There are a lot of bank stocks that are seriously undervalued because of mark-to-market accounting.  In mark-to-market, financial statements have to count the value of assets and liabilities by the price that they would fetch on the open market, currently, to a willing buyer.

Right now, most things would end up going for distressed prices.  Yet fundamental values could be higher.  Its a problem if a firm wants to hold on to a financial asset, waiting for a better price.  The firm has to let is financials reflect the current poor price.  This can damage capitalization ratios and lead to some of the widespread troubles that are plaguing banks right now.

The impact spills over into the broader economy, because provoked by fear of writedowns, banks are less hesitant to relinquish their capital.  This is one of the forces that leads banks to not lend.

Solving it would free up capital and potentially jump start our economy.

Some firms have a huge gap between their share price and their book value. Look at American Capital ( ACAS.)  This firm has a book value of approximately $15 per share.  Its stock is selling for less than a buck.  American Capital’s CEO, who had loans from ACAS collateralized against homes he owned, had to go into foreclosure.

Senator John Sununu raised the question today about how federal regulation of the insurance business would work.  Sununu is broaching on something that is a bit of a third rail, but as a departing Senator, he has some freedom to speak openly.  Insurance companies own a lot of assets, and their businesses are so large that they can present risks to the entire financial system.  The need to bail out AIG is only the largest example of why insurance matters, and why insurance regulation is an important question for how policy navigates through the credit crisis.

“There are some aspects of certain insurance corporations that required federal rescue,” said Joel Seligman, the President of the University of Rochester and a member of the board of FINRA.

Insurance regulation is anachronistic,” he said.  Right now, insurers are regulated on the state level.  They are ruled by 55 different governments (50 states, DC, Puerto Rico, et al.)

Proposed was the idea of regulation, on a mandatory basis, based upon firm size.  It could be based upon size of assets, or some measure of policies.

Its not the only place for new scope of regulation.  Another idea was a combination of the FDIC and the SEC.

Last month, the SEC put more than 700 financial services firms on a list that gave them protection from short sellers.  The idea was to to thwart short-term short selling the exposed companies to runs on the value of their shares.  

It was not just banks, but also some builders, some insurance companies, and plenty of consumer finance firms.  There were a few odd exceptions (HSBC, GE), but the list was complete in its detail.  

Elsewhere, Congress extended huge loans to our automakers.  Now they are talking about more action.

But, what if you were in the business of making homes, financing them, and also providing vehicles for traveling?  

You would be out of luck.  Fleetwood (FLE) could use the help, as could just about anyone in the manufactured housing business.  Fleetwood makes homes and also vehicles (although they have exited finance) and their share prices are really low right now.  Their own access to credit is part of the problem — they have to pay off some notes by December at a time when their cash flows are not great.  

The same protections could be sorely needed at Champion (CHB) which has dropped from 13 to just 2.17 in the last twelve months.  

This is an industry that supplies a good percentage of America’s affordable housing.  

Now there