|
Posted on 12/30/2008 7:09:52 PM PST by rabscuttle385
Bankers who've been seeking Congress’ help to suspend "mark to market" accounting rules lost a battle today: The staff of the Securities and Exchange Commission recommended in a report that mark-to-market rules should be maintained, although "improved."
The report had been ordered up by Congress in October as part of the financial-system bailout.
The banking industry asserts that mark-to-market, or fair-value, accounting worsened the financial crisis. The rules require require financial institutions to value securities on their books at current market prices, even if the securities don't mature for many years.
(Excerpt) Read more at latimesblogs.latimes.com ...
|
Wait just one,
You mean the IDIOTS who couldn’t find Bernie Maddoff screwing everyone in sight is telling us that “Mark to market” lunacy is OK?
Somebody please hand me another stiff drink before we go over the cliff.
Perhaps but you also have companies carrying assets on their books that are not worth what they claim/wish they are.
Pick your poison.
Isn't due-diligence supposed to reveal that?
/johnny
It is just stupid to not allow management to suspend the rule when such a move can be substantiated.
Similar well-intentioned buy inflexible rules causes mortgage holders to foreclose on homeowners who suddenly were underwater on their loans due to what? (mark to market! on neighborhood home values).
One thing is clear: of all the blame for this debacle, well-intentioned government rules that could not be waived or suspended for good cause are to blame for a substantial fraction of the collapse.
I move to impose some mark-to-market honesty about the cost of government!
Sounds to me that investments are being valued at original price until they're sold;
what am I mising?
Please?
**as the inflexible rule forced fund managers to dump whole classes of securities into a market that suddenly had no buyers**
Is there something in the Mark to Market rules that state the banks and fund managers have to dump whole classes of securities if they lose value?
After all if the securities are valued at market value and you sell them then that doesn’t help increase your assets if they are sold for that value.
**Similar well-intentioned buy inflexible rules causes mortgage holders to foreclose on homeowners who suddenly were underwater on their loans due to what? (mark to market! on neighborhood home values).**
You mean the mortgage holders are foreclosing on homeowners who has been making their payments but their property is now worth less than the loan?
Once again, regulators prove that they don’t get it and they don’t care to.
It was also the Bush SEC which abolished the long-standing "Uptick Rule" applicable to short-selling. And it was the same Bush SEC which suspended the ban on "naked" short-selling. Predictably, these rule changes allowed speculators who had no skin in the game to pound good companies into oblivion.
I voted for George W. Bush twice, but his monetary blunders have been so stupid that they defy belief. You have to wonder if somebody didn't want to trigger the paper insolvencies and bank runs that have wrecked our economy -- it couldn't have been done better by design.
Lunacy! Suicidal lunacy!
This is desperately BOGUS!!!
It should be remembered the alternative to mark to market is mark to model.
Mark to market is fine for futures trading, contracts are settled at the end of the day.
When banks and corporations brought "the deal is the deal" mentality to obscure OTC derivatives, they began to half heartedly "settle" quarterly or semi-annually "when the market price could not be objectively determined (because there was no real day-to-day market available), so assets were being marked to model, and sometimes marked to fantasies."
"The SEC report recommends improving mark-to-market rules, including via "the development of additional guidance for determining fair value of investments in inactive markets," such as in situations where market prices are not readily available."
This is fine if the SEC decides to enforce the rules and quits abruptly changing them in the middle of the game.
yitbos
Mark-to-market requires that asset valuations are set by actual market trades of the same or similar securities. I don’t think anyone argues against using it where there are active, functioning markets.
The problem for many banks and financial institutions is various mortgage securities. In some cases, those securities are still performing and the bank doesn’t plan on selling, but some other firm got desperate and sold similar securities for 20 cents on the dollar. Under mark-to-market, the bank now needs to value its holdings at 20 cents on the dollar because that’s the last market price. The bank’s assets go down and if the mark down is severe enough, they need to scramble to raise capital.
The alternative to mark-to-market is mark-to-model, sometimes called mark-to-make believe. In that case, the security is valued by some model, typically cash flow. The problem there is the values can be manipulated by the modeling assumptions.
Yep - and the next "report" will be on the benefits of Zero down, interest only, "no income verification" loans.
Good point if you're talking about assets that do not generate income. However, the MBS's do generate income even if they have a default rate of 20% or higher within the bundled mortgages. Therefor the MBS's do have some value, but with mark to market they are written down to next to nothing.
Happier New Year!!!
gitmos
Actually, what I meant to say in reply was... Sarbanes/Oxley SUCKS!!!
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.
