“Accounting Change May Hurt Geithner Plan”
Unintended consequences, or....
...the right hand doesn’t know what the left is doing?
When in doubt, blame the accountants. As if how a dead fish is placed on the counter makes the kitchen smell better. Bad ideas and bad investments always end up looking bad too. This government has spent waaaaay too much time and energy using the internal revenue code and accounting rules to perform social engineering.
If you have been paying your mortgage for 15 years, and have 15 left, and the neighbors on both sides of you just defaulted ... with mark-to-market your mortgage just lost a lot of value.
It's net present value of future cash flows to the bank, but because you are now in a “risky neighborhood”, they have to use a higher discount rate to figure what your mortgage is worth to them. Even though YOU are still paying, and YOU still have a job, and YOUR mortgage isn't subprime, and YOUR mortage is a traditional 30-year. Mark-to-market can be stupid in this situation, but they still have to use it. And then the bank's assets fall (on paper) and their balance sheet worsens (on paper), and they need a bailout (on paper), and nothing with you or your mortgage has changed, except your no-good neighbors defaulted. And Geithner fires your bank's CEO and the government steps in ... all based on paper accounting.