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Mark-to-market is a perfectly sensible requirement/procedure for some assets: items that trade every day, for instance.

For items that trade only once or twice a year, immediate mark-to-market is ridiculous procedure for evalation, guaranteed to mislead, and unfairly destructive of capital to boot.

Mark-to-rolling-average, perhaps a 2- or 3-year average, is what is necessary (and fair, too) for these and other illiquid and semi-liquid assets.

Apparently, though, either:
1) the ''experts'' and the hot-shot quants can't figure out this remarkably simple fact, or
2) those who decreed mark-to-market for normally illiquid assets have an agenda of stealing property at fire-sale valuations, economic conditions be damned, or
3) those in power have an agenda to punish certain financial institutions, qood possent, or
4) All of the above.

I agree with many of your points, but I would add that there is/was a reason for wanting MTM accounting:

The lies and fabrications of highly elastic accounting had reached a point coming out of the dot-bomb bubble that people wanted a set of financials from a company that they can then put through a (relatively) simple program, come up with some ratios and trends and make a simple, qualitative assessment based on the company’s own accounting.

The complex nature of many of these “mark to model” assets prevents that - simply because the company does not make the “model” software available to investors. If the software that implements then model were available to investors to run and verify the value of some of these illiquid assets for themselves, there would be a bit more trust in the companies that hold this crap on their balance sheets.

The real solution to this crap would be for companies to cease pursuing and buying assets that are absurdly difficult to value. If they maintained their books in easily-understood assets, then we would not have this mess.

The reason that “mark to market” rules were adopted is that in the 1980’s, S&L's and other firms kept bad loans and other impaired assets on the books so as to stay in business and draw in new capital and lending. These new investors and lenders were new victims destined to lose their money when the S&L or other company went eventually bust. In the meanwhile, corporate officers and directors could draw lush salaries and even loot the business.

For firms and economies affected by “mark to market,” pain now in the form of bankruptcy reorganization or liquidation is better than letting impaired assets subvert corporate balance sheets. Firms that want to avoid the effects of “mark to market” need to keep their balance sheets stuffed with cash and cash equivalents — even though that reduces immediate profit taking.

>>>For items that trade only once or twice a year, immediate mark-to-market is ridiculous procedure for evalation, guaranteed to mislead, and unfairly destructive of capital to boot.

You make great recommendations particularly on the averaging), but doesn’t it happen that the markets are liquid in good times and illiquid in bad times. Mark to Mark appears to have been invented to report PROFITS in good markets... not LOSSES in down markets.

If there is no underlying tangible asset,then perhaps financial institutions shouldn’t be creating this fictitious transaction— particularly those that rely on the federal government for socializing losses.

Gosh, what did we do in the 1950s in this situation? /s/

This debacle is causing a devastating misallocation of taxpayer funds.