September 26, 2008
Mark-to-Market or Mark-to-Model?
This, to The Refugee's ignorant eye, seems to be a pretty good primer on the difference between mark-to-market and mark-to-model accounting rules that may have precipitated the current financial crisis.
Economics and Markets
Posted by Boulder Refugee at September 26, 2008 6:15 PM
Brian Wesbury has a superb paper (pdf) that claims mark-to-market is 70% of the problem and that rescinding the rule should be 100% of the solution.
It is true that the root of this crisis is bad mortgage loans, but probably 70% of the real crisis that we face today is caused by mark-to-market accounting in an illiquid market. What’s most fascinating is that the Treasury is selling its plan as a way to put a bottom in mortgage pool prices, tipping its hat to the problem of mark-to-market accounting without acknowledging it. It is a real shame that there is so little discussion of this reality.
I've been the ThreeSources cheerleader for the plan, but must admit that this piece is the most compelling argument against it that I have encountered.
Brian Wesbury has a superb paper (pdf) that claims mark-to-market is 70% of the problem and that rescinding the rule should be 100% of the solution.
I've been the ThreeSources cheerleader for the plan, but must admit that this piece is the most compelling argument against it that I have encountered.
Posted by: jk at September 28, 2008 4:10 PM | What do you think? [1]