Will the SEC Suspend Mark-To-Market?

Fade any rally from the suspension of mark to mark. LOL at thinking that changing an accounting rule can alter what is going on here.

 

Why don't they just do a reverse split on the Dow? Or just change the calculation to include the absolute value of the current day's move?

 

The last I read GS didn't want to suspend the mark to market, so until then I vote no.

 

The problem of overlooked consequences of mark to market of illiquid assets must be addressed. A blanket suspension won't look good to most folks.

 

How did it look prior to the enactment of the rule? This rule is not that old (1 year?).

 

The SEC is now proposing a new mark to market rule where the owner of a security can mark it to market at whatever price they <i>want</i> to be able to sell it. Taxpayers will then be buying these assets at the full asking price plus a 10% reaming fee.

 

I remember doing that with marbles as a kid.

 

Former FDIC Favors Head Suspension of Mark to Market

http://www.cnbc.com/id/15840232?video=883410796&play=1

 

Mark to market is positive feed back. It makes things look overly good during rising prices and overly bad during bad.
While this may be acceptable with liquid markets it is not realistic with illiquid markets.
The real problem is the excessive margin taken on illiquid positions. How many of you elite traders would buy or guarantee a product that had basically zero liquidity on high margin. You gotta be able to unload or you are in an untenable position.

Mark to market elimination will not solve the underlying problem now that Pandora's box has been opened.

 

Accounting board adopts guidance to ease crisis

By JOHN CHRISTOFFERSEN – 3 hours ago

NORWALK, Conn. (AP) — The standard-setting board for corporate accounting adopted new guidance on Friday that will give banks a break in the distressed market and could boost their balance sheets.

The five-member Financial Accounting Standards Board decided to provide some flexibility in applying "fair value" accounting where there is no market for a security — like the market for banks' mortgage-backed assets that has been dysfunctional for months.

The board expects the new guidance to take effect Saturday.

"We're giving people a wider range of options and input to get to fair value," said FASB spokesman Neal McGarity.

Fair value accounting, also known as "mark-to-market" accounting, requires banks to value their mortgage-related assets at current market prices. Devastated by the write-downs they have taken on mortgage assets since the collapse of the housing market, banks — with the backing of congressional Republicans — have been pushing hard for the Securities and Exchange Commission to suspend the requirement.

The $700 billion financial rescue bill enacted last week affirms the SEC's authority to suspend the "mark-to-market" requirement and directs the agency to conduct a study of the rule's effect on U.S. bank failures this year.

The FASB board, at a public meeting at its headquarters in Norwalk, adopted the proposal as guidance for the rule.

Under the change, when an active market for a security doesn't exist, companies will be allowed to use their managers' estimates of value, taking into account expected future cash flows and risk discount rates.

"Often when there is a dearth of relevant observable data, more analysis and some judgment needs to come into play in those situations," FASB Chairman Robert Herz said.

The FASB and the SEC jointly issued the clarification on Sept. 30, a move that was applauded by the banking industry, presidential contender Sen. John McCain and Republican leaders in Congress.

But critics, including some analysts and investor advocates, say that suspending the fair value rule would muddy the validity of financial statements and encourage exactly th