Mark to market is a drag

Well, that didn't take long. March 17th I was telling you about this. Barely two weeks ago, and Congress is already "applying pressure." Funny, how the bonuses are so difficult to do something about. Marketwatch this morning:
Responding to pressure applied by lawmakers on Capitol Hill, the Financial Accounting Standards Board on Thursday voted unanimously to give auditors more flexibility in valuing illiquid mortgage assets that may have long-term value.

The new guidance, which is expected to boost bank operating profits when they report first quarter results later this month, alters so called mark-to-market rules, which require banks and other corporations to assign a value to an asset, such as mortgage securities, credit-card debt or student-loan investments based on the current market price for either the security or a similar asset.

Banks complain they can't sell certain assets because of a lack of a market, but that the assets are not distressed and have strong cash flow.
Seeking to resolve this situation, FASB's guidance allows banks and their auditors to use "significant judgment" when valuing the illiquid assets. [emphasis mine]


Crossposted to Acid Test

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