Perki

Obama's TARP 2 Signals an End to Mark to Market

Help me understand "Marking long term securities at short term valuations makes no sense at all".

A mortgage is a long term security much like a bond, so you would contend that the market value today of a specific long-term bond is not an accurate valuation for a financial firm that owns it?


On Jan 14 02:10 PM Jason Schwarz wrote:

> Mark to market has turned the investment world into a group of fearful
> day traders. The health of our financial system should never be
> tied so closely to short term real estate fluctuations. Marking
> long term securities at short term valuations makes no sense at all.
> We need to provide our great banks like Bank of America, JP Morgan,
> Wells Fargo, etc... with a better system to be able to weather future
> real estate corrections. Returning to a system that values the long
> term over the short term is severely needed. This post-Enron experiment
> has gone terribly wrong and I am continually shocked that the masses
> don't see it.

Obama's TARP 2 Signals an End to Mark to Market

Surely I am missing here. If you eliminate mark to market regulations in taxes and GAAP, how does an investor have any idea of the value of the corporation's assets? How does the government know the true value of the collateral for loans? Just value them at cost or face value?

All mortgages, regardless of underlying debtor quality, have the same face value? Again, I must be missing something. Just having a new president, even if it were one with depth of economic experience and education (Volker?) could hardly eliminate the need to mark assets to market.

However, I do see that it would eliminate all of the paper losses of the financial industry in one fell swoop. Then, it would not appear as though we have any problems at all in the financial industry and no more bailout funds would be needed.