Kinabalu

Time to Exempt Mortgage Securities from Mark-to-Market Rules

The mortgage debacle that we're currently going through isn't the first time that new accounting rules had unintended consequences. But to say that elimination of the mark to market requirements would be an end-all solution is going too far. The fact of the matter is that the market, and the rating agencies, did a terrible job of evaluating the risk in many of these complicated mortgage backed securities when they were first issued. They were way over-priced then and they are way under-priced now.

Sorry najdorf, I generally agree with your comments but you can't have it both ways. When you ask "Why would the market be good at pricing stocks, bonds, etc. and not good at pricing mortgage-backed securities?" Either the market was right when these complex securities were issued or its right now, or... it was wrong both times. I think some investors are going to make a lot of money on the mispricings.