citetez

FASB Changes Perpetuate Fair Value Lying

The "lying" was really in forcing banks to book paper losses before they occurred (and when they might never occur) on illiquid assets based on a temporary market crisis. This killed the banks and perpetuated the crisis. Lifting Mark to Market will be hailed as the turning point for the economy. Not all will be rosy from here, but this allows the markets and the marketplace to heal. Some banks will and should fail, but for the most part this was a fictional crisis crated by two stupid rules: mark to market as applied to the banks and the elimination of the uptick rule.

Paulson/Bernanke: $700 Billion at 'Hold to Maturity' Pricing

The true problem in the credit crunch seems to be the accounting rule requiring mark to market. By making people write down assets because there is a temporary markte lock up is ridiculous. Any asset priced a s if it must be sold tomorrow rather than in an orderly fashion (hold to maturity value discounted for market interest expectaions) causes the stated "value" to crater. Once the process starts, it snowballs. CDOs and similar products can not be valued because the market dried up. There is no market because everyoe is afrraid of what the "mark to market" requirement will do to their balance sheets. If we get rid of the "mark to market" rule, the market will return, and stabiltiy will come back to the financial markets. Such an approach avoids the need to have the government create and finance a market.