The recent move to relax the "mark to market" rules a step very long over due gave renewed hope that the credit crisis would be abating. Since Sarbanes Oxley the stringent "mark to market" rule have forced banks and other financial institutions to take premature write downs of assets . What was happening is that a lack of interest in a particular asset class was being interpreted as that asset having little or no value. This process became acerbated by the diminished volume in certain asset classes as the crisis brewed. A relaxation or tweaking of the rule would give financial institutions more operating margin to value loan portfolios instead of the no bid no value fixed rule. In simple term if you have your house for sale and no one makes an offer on a particular day that house according to 'mark to market" would be worthless on the close of that day. Now any one who has sold a house knows that you might have a diminished value but having no value is highly unlikely.
What is troubling is what took so long to recogize and act on this issue when it seemed so fundamental to the credit crisis? This reminds one of the unintended consequences so often of congressional action given legislation is often agreed to by people with little or no experience in the industry they are regulating. To some one in full grasp of the magnitude of the situation this should have been obvious and the first thing a regulator would have tinkered with not the last after spending over a trillion dollars .
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