What does the relaxation of mark-to-market accounting mean in RealSpeak?
Here's ClusterStock to the rescue:
You borrow $200 to buy two cows. You pay $100 for each cow. You write that down.It gets better from there.
Lightning strikes one of your cows, an unlikely event that should only happen once every 10,000 years.
Lightning strikes the other cow.
You notice the cows are on fire.
Your paper still says $100.
Fortunately, mark to market has been suspended so you don't have to pay attention to the fire.
Your cows look dead.
Your paper still says $100.
Fortunately, mark to market has been suspended so you don't have to pay attention to the fact that the cows look dead. They're probably just sleeping.
Read on.
(H/t ProPublica)
1 comment:
Given that regulators are supposed to take over insolvent banks(by law), one wonders if this isn't simply cover for the regulators. It sure has no meaning with investors, as most will see this only as less transparency(negative). It only applies to certain assets but in balance it is still simply less transparent accounting. See Bill Black on Bill Moyers Journal for some interesting thoughts.
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