Quote:
Originally Posted by widebody911
There was a piece on NPR this AM about how the Mark to Market rule is being being blamed by some for the current economic mess.
I don't see it this way; without the MTM rule, it seems companies could value a truckload of turd pies at $1M/lb and nobody outside the company would be the wiser. The person NPR had on defending the rule basically said it was a pain in the ass as the value of a company's assets/liabilities would unnecessarily fluctuate as the market rose and fell. Hell, that's exactly what I would want to see!
If someone wants me to loan them money and use their Yugo as collateral, I'd expect to use the current market valuation ($3.50), not their own pie-in-the-sky assessment that it's a "collectors car" worth $500k @ BJ.
So now, the powers that be are contemplating suspending the rule. Translation: CDSs and MBSs which currently aren't worth the electrons they're printed on will have a book value of trillions.
To me it seems like an attempt to sweep some stuff under the rug. |
This is all fuzzy to me, but MTM means that if you have a 'thing' that currently does not have a buyer... then it has no value. However, some of these 'things' still produce income and if held to maturity may still be paid back... so it has some value, no?
i.e. my software business has no (or little) value to anyone else since its essentially me and a couple of 1099's as contractors to several clients . However, it produces income for me... so it has a value of some sort, no? (not sure if that analogy is a good one).