Economists and financial analysts vehemently disagree about bailouts and which sort of regulations work or don’t.
But now many agree – from investor Warren Buffett to Republican Steve Forbes to Democratic economic adviser Mark Zandi, to name a few – that mark-to-market accounting “exaggerates losses and results in tighter lending when it is used to measure regulatory capital in illiquid markets for instruments such as mortgage-backed securities,” according to John Berlau, director of the Center for Entrepreneurship at the Competitive Enterprise Institute in Washington, D.C.
Mark-to-market accounting rules require corporations and banks to value their assets according to current market prices – which have fallen due to the financial crisis – often causing corporations to take enormous paper losses.
Colorado Bankers Association President Don Childears said that the Financial Accounting Standards Board agreed to address mark-to-market accounting within three weeks from March 12, when testimony was heard – by the Capital Markets Subcommittee of the House of Representatives Financial Services Committee – from Rep. Ed Perlmutter, of Colorado’s 7th congressional district, and others, regarding mark-to-market accounting.
“We think we’re finally seeing some good news,” Childears said. “We hope they’ll deal with it in an appropriate manner.”
Berlau’s op-ed piece, “Accounting rules Exacerbate Crisis,” gives more insight into the controversial mark-to-marketing accounting rules.