More Mark-to-Market Myths

Unbelievable the amount of spurious silliness being spewed about mark-to-market today. People  have their facts wrong — most financial services mark a small percentage of their assets to market today; GE Capital is at 2%  — and we are giving banks a pass in terms of how they report losses and value goofy assets.

Here is an example, courtesy of Accounting Observer:

FSP FAS 115-a, 124-a, and EITF 99-20-b, the proposal that softens the blow of recognizing other-than-temporary impairments, was essentially unchanged from the original proposal. It remains a chancre on the body of accounting literature. The credit portion of an other-than-impairment loss will be recognized in earnings, with all other attributed loss being recorded in "other comprehensive income," to be amortized into earnings over the life of the associated security. That’s assuming the other-than-temporary impairment is recognized at all, because the determination will still be largely driven by the intent of the reporting entity and whether it’s more likely than not that it will have to sell the security before recovery. This is a huge mulligan for banks with junky securities.

Related posts:

  1. Mark-to-Market Myths: FASB-ness vs. Godliness
  2. Afternoon Reading 12/23/2008: Mark-to-Market, Keynes, Quants
  3. The Trouble with Credit Market Alarmism
  4. Four Myths About the Financial Crisis of 2008
  5. Mark Cuban Hates Suits