Housing Policy

Rest in Pieces, Mark-to-Market

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From the better-late-than-never department:

No more funk in that bunch

[T]he Financial Accounting Standards Board on Thursday voted unanimously to give auditors more flexibility in valuing illiquid mortgage assets that may have long-term value.

The new guidance, which is expected to boost bank operating profits when they report first quarter results later this month, alters so called mark-to-market rules, which have required banks and other corporations to assign a value to an asset, such as mortgage securities, credit-card debt or student-loan investments, based on the current market price for either the security or a similar asset.

Banks have complained that they have viable assets with strong cash flows that can't be sold because there is no market for them.

Seeking to resolve this situation, FASB's new guidance allows banks and their auditors to use "significant judgment" when valuing the illiquid assets such as mortgage securities.

Given that the toxicity of mortgage-backed securities have been front page news for two years now, and U.S. taxpayers are on the hook for $13 trillion and counting in the ensuing bailouts, this loosening of a Bush-era Wall Street regulation seems rather on the slow side. But, still.

Reason on mark-to-market here.