Apparently Chris Dodd mentioned that adjusting mark-to-market "might" be part of the Plan

[Kurt_and_Hunter]

Apparently Chris Dodd mentioned that reforming mark-to-market "might" be part of Obama's economic plan. (Reported on TV. Probably an AP item but I don't have a link.)

If changes in mark-to-market are actually being considered that would be a big development. I don't know that it would be a good development, but certainly big.

"Mark to market" is an accounting rule that requires financial institutions to value assets at what they're worth. That doesn't sound too controversial, but it means what it's worth right now and right now sucks.

Republican market types all say that mark-to-market is causing problems because the current value of some assets is quite depressed which makes banks appear insolvent. Which they are, of course, since nothing has money value beyond what you can sell it for, but I digress...

But there's an argument to made that in a sharp valuation down-turn mark-to-market puts unrealistic pressure on some institutions. I don't know that I buy it, but there's an argument to be had.

Anyway, if loosening mark-to-market is being considered it seems like kind of a nuclear option, stimulus-wise. Essentially, we would take a therapeutic step back from reality to catch our breath. "Yes, we know these banks are really broke but maybe they don't need to be broke right now. Since we're on the edge of a deflationary spiral this might not be the best time to deal with it and if allowing them to get back a little bit of fantasy accounting gooses the economy short-term then the benefit might outweigh the harm."

There's a definite trade-off involved but things are probably bad enough to justify at least thinking about whether injecting some optimism in the markets even at the price of fantasy. (I would think of it as methadone... the Wall Street junkie-monster has been cut-off from addictive imaginary accounting and gone into shock, so maybe cold turkey is too dangerous and we need to detox it. Not saying we should or shouldn't, just that no options should be off the table.)

The politics of Dodd saying something like that are interesting. The day the stimulus finally passes the senate Geithner reveals that there's no specific, detailed Treasury plan yet and the market sells off 5%. Then, after the market closes Dodd alludes to about the only thing out there that would make the market really happy.

Was he free-lancing? Trial-ballooning? Just popping off? Beats me. Sometimes Chris Dodd just says stuff.

[stray cat]

1. from the little I know - I hope they do it

[PM Martin]

2. This is the way it should be.

What ever their current market value is what they are worth and that MUST be the stated worth of the assets.
Wasn't the overvaluing of assets the thing that brought us into this mess in the first place? Yes it was!

[Double T]

3. Phony economies require phony valuations and phony numbers.

NOTHING regarding corporate or government accounting is real, which is exactly WHY we are in this GD mess. Looks like business as usual must prevail because this is no time for harsh realities. wall street loves to leverage dollar bills into bankruptcy. The government likes to fabricate dollar bills until they become worth-less. Looks like we are in good hands with total idiots like credit card loving chris dodd.

[TygrBright]

4. I sure as hell hope not. We need a reality-based economy...

...to replace the acid-trip-gone-bad built up by decades of GOPpie greedheads and corporate fascists. Yes, it might hurt. A lot. Reality does, sometimes.

But we're never gonna build a stable future for our grandchildren without giving up the windowpane.

gloomily,
Bright

[uponit7771]

5. For housing ONLY!! If banks can do M 2 M on everything than they'll all be writh brazzillions by..

...their own valuations.