re: "Mark To Make Believe"

quote:

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do you believe that the market/financials will get a nice pop if M2M requirements are relaxed (e.g., modified to reflect “hold to maturity” value in an “orderly” market)?

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I really don't know what the stock market would do if MtM is relaxed. I lean towards 'yes' to answer your question but there could be a backlash and their stock prices might fall even further.
My motivation for wanting MtM suspended for some definite period is not about helping their stock prices. It has to do with the recognition that it just does not work in this economic scenario.

In spite of the Colonel's accurate statement that his stock portfolio is marked to market every day and he has to pony up if there's a margin call, it is not the same. If the Colonel goes bankrupt, very few people would notice or even care. And there would be no ripple effects to his misfortune. If the largest banks in the world go under basically to please the professional bean counters, we will all suffer. It's a fantasy by absolutists that banks can't operate with low or negative capital. Of course they can. Banks have been operating in that condition for decades, even in 'developed' countries (Japan).

My thought is that if MtM is suspended, companies (banks) would still have to disclose in some fashion the securities they hold which would otherwise have to be marked to market. For example, they would have to disclose what they paid for them along with disclosing the P&I cash flows they are receiving from the underlying assets in the securities. Or maybe they would even have to provide an estimate of their current value. They just would not have to adjust their capital ratios (temporarily) for the decline in value.