What I can not understand is how a bank can mark to market the assets, if they have no model to find its value in time of right now. The assets were bought with future value, right? But that value is high, and not reached yet. So what is the mark to market value now, and how to find that?
you have to find a market. And currently bid/asks are wide enough to drive a convoy or trucks through.
Right, have to find a market. But when there are bets on defaults, it is in some interest to keep that spread high so they get paid.
Let's all go to make believe land and just say the bank positions are better than what they really are! That will be great! Everything will be saved! Any rally on the repeal of MTM accounting will just be another shorting opportunity. Even with MTM repealed, everyone will know the warts still exist.
Yep, lack of clarity = lack of confidence. Removing more clarity isn't going to help. The investor has lost confidence and sees the whole market as a scam, I'm not sure this is the approach that is going to get the public to believe in these institutions. Geitners approach actually seems better lol. "Show me everything, and I will give you the money to cover the worst possible"
First of all, I don't understand this: According to the accounting rules I've read about FASB 157, MTM is actually an option, not an absolute requirement. Am I right? Second: the hearing is just a hearing, it doesn't have much legal impact, am I right? When will be law be enacted? Third: what's the alternative to MTM? Everybody uses his own model to price the derivatives? That's going to create a even more mess, right?
Well mizhael, everyone is already lying. Sun trust bank (STI) is now being sued. I have no idea if the lawsuit will be successful because bankers can claim ignorance with these different models. Even with mark to market, things are worse then they seem and they hide the pain. They will need some smoking gun emails or documents, which are probably around somewhere. As far as the significance of Congress... If the Sec wanted m2m gone, they could do it tomorrow. Bernake and Geitner could get it forced in a couple of days. None of those 3 have shown any desire to do. Congress could write a law and compel, so they do have the ability, they can create the ability.
M2M ain't going anywhere lest we return to the days of Enron when shady transactions were rampant. But then politicians are just like newbie traders. They get all aroused when the market soars but shit their pants when the market is in the dump.
heh Might cause a spike for a bit but in the end people will know that banks will just be polishing turds and putting them in a new box. But the same turd is still there. No one trusts anyone.