Mark-to-market tweak 'may be' in Obama plan-Dodd Wed, Feb 11 2009, 00:35 GMT http://www.afxnews.com WASHINGTON, Feb 10 (Reuters) - The chairman of the U.S. Senate Banking Committee said on Tuesday that adjusting mark-to-market accounting rules eventually "may be" part of the Obama administration's plan to stabilize financial markets. Sen. Christopher Dodd told reporters after a hearing: "You ought to be able to come up with some creative idea that doesn't retreat from mark-to-market but would allow some response when you have a pro-cyclical environment." Asked why no such idea came up at the hearing on the administration's plan and why no accounting rules adjustment was included in the plan, Dodd said: "It may be. It may be." Dodd, a Democrat from Connecticut, said last week that it might be possible to modify mark-to-market accounting rules for U.S. banks facing steep writedowns of troubled assets without abandoning the underlying accounting standard. The issue of how to value distressed assets held by U.S. banks has been one of the most difficult challenges in constructing a bank rescue plan. When Treasury Secretary Timothy Geithner unveiled the administration's plan at a Tuesday news conference, he was introduced by Dodd. (Reporting by Kevin Drawbaugh; Editing by Tim Dobbyn) Keywords: FINANCIAL/BAILOUT MARKTOMARKET (kevin.drawbaugh@reuters.com, +1 202 898 8390, +1 202 488 3459 (fax)) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved.
Barney Frank said there will be hearings on mark to market in the next couple of weeks. his own opinion was that mark to market should not be eliminated. He said that banks should not have capital constrained because of mark to market of assets that are intended to be held to maturity. as per CNBC.
Not needing to mark your positions on assets you intent to hold until maturity means that you can carry them on your balance sheet at face value, even though they may be worth only 30% of face value? If the instruments only return 60% of face value over the course of their lifetime, when do you write down the asset? I guess in the case of a total default before maturity you could do it then.) This is a stupid idea. I wonder if the MtM rule changes are intended only for calculating the required reserve amount for the bank. I am guessing potential creditors and aquirors (large scale, not individual stockholders) would be able to demand financials with marked assets? I guess it doesn't change too much, since currently a lot of the assets are MtG (marked to guess) anyway, as opposed to marked to market. The retail level investor will continue to get shafted in the sense that whatever balance sheet analysis they base their stock purchasing decision on will be basically nonsense (not that it isn't already, just saying).
to allow not to MtM is the worst idea ever - even worse than to forbid shorting. nobody will ever believe anything after this is implemented because everybody will be able to say whatever they like....