I'm absolutely surprised at how many people think suspending mark-to-market is a good thing. It seems that all of the finance gurus whose financial sleight of hand and mythical magical creations of wonderment drove us into this mess, want to do it again with suspension or "loosening" or mark-to-market. For those of you who don't know mark-to-market is an accounting procedure in which firms are required to value assets at their current market price.
Quick example: If I buy 3 investment properties at $100K apiece and decide to hold them for 18 months b/c I think they will be worth considerably more, say $125K total, mark-to-market means that I must value those properties at $100K on my balance sheet even though I have no intention of selling at that price.
Now the asset derivatives that are currently weighing down the banks are a little more complicated than property but you get the picture. These firms currently have to value their assets at market prices which is little more than cents on the dollar. Now I'm not necessarily for mark-to-market but the time to change it would have been when these derivatives were liquid and were probably present valued at or near premium. Switching then would have been totally above board, because it would have been on principle which meant not necessarily in your (the banks) best interest. Trying to change now because the market is illiquid just seems more like cheating.
Bank A's Asset Valuation March 12, 2009 Under Mark-to-Market = $5.5B
Bank A's Asset Valuation March 13, 2009 Under Revised Mark-to-Market = $9.2B
You see changing things on paper makes everything all better!!!
