Wednesday, October 01, 2008

Is Wall Street Broken Part 3: Down with “Mark to Market”



A simply way to improve bank solvency at little or no cost to tax payers would be a revision in the “Mark to Market Rule” For the laymen all financial institutions and investment funds must at the close of business price all the assets on the books at the bid price for that day’s business. So in simply terms if your house is on the market and you received no offers on that particular day your house received no bids, and according to “Mark to Market” your house is worth nothing. Yes that’s right nothing, zero. I think a light modification in this accounting rule is in order. Perhaps a moving average or a longer term bid period. It’s simple, it’s sensible and I dare say it cost far less than $700 billion.



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