Mark-to-Market Yet Again
I found this information about the "mark-to-market" rule at an article posted over at the Backyard Conservative. The ending was pretty interesting,
"According to Milton Friedman, mark-to-market accounting in the Great Depression caused the failure of many banks. Little known by economic historians is that in 1938 President Roosevelt’s administration finally realized the mistake and suspended mark-to-market accounting.
"Then, from 1939 to 2007, the US had a relatively subdued business cycle and experienced no panics or depressions, even in the 1980s and 1990s when more than 3000 banks and S&Ls failed. In 2002 with Sarbanes-Oxley and in 2007 with FASB 157, mark-to-market accounting made its comeback. Since then, the economy has had serious troubles. Once again, correlation is not causation, but it sure is an awful coincidence."
Why haven't we heard anything on this from Washington? Could it be that very few in Congress understand it?
"According to Milton Friedman, mark-to-market accounting in the Great Depression caused the failure of many banks. Little known by economic historians is that in 1938 President Roosevelt’s administration finally realized the mistake and suspended mark-to-market accounting.
"Then, from 1939 to 2007, the US had a relatively subdued business cycle and experienced no panics or depressions, even in the 1980s and 1990s when more than 3000 banks and S&Ls failed. In 2002 with Sarbanes-Oxley and in 2007 with FASB 157, mark-to-market accounting made its comeback. Since then, the economy has had serious troubles. Once again, correlation is not causation, but it sure is an awful coincidence."
Why haven't we heard anything on this from Washington? Could it be that very few in Congress understand it?
posted by Publia at 10:21 PM
4 Comments:
It's because all the members of Congress -- all 535 -- as well as members of the current Administration are financial idiots. I've been saying for many months now that mark-to-market was a key problem with the financial sector markdown, and I'm glad to see you focusing on this in this posting. It's high time someboody raised this issue effectively, but don't expect anyone in Washington to figure it out, least of all the tax-dodging Secretary Geithner, whose speech this morning has done such wondrous things for the stock market! The stimulus package should be completely jettisoned. JK
Completely jettisoned is absolutely right! I think the Congress is capable of understanding the mark-to-market rule, it isn't very hard. I should imagine most have had some accounting in their lives, but maybe I am dreaming!
Dow is down nearly 400 points with one hour of trading to go. Thank you, Treasury Secretary!
I think you are dreaming. Dodd, Pelosi, Frank and Reid couldn't add one plus one and come up with anything but 11.
JK
It's because the Democrat Congress knew exactly what they were doing they had the FASB change to Mark to Market accounting principles. Remember it was the Dem Congress that kept harping about the looming recession before it actually hit.
Now the Dems are changing Mark to Market rules to allow Fair Market Value.
All of this was done to get the Dems back in power. Not that the Republicans were any better.
http://blog.no-appeasement.us/2009/07/24/recovery-by-loosening-mark-to-market-to-push-national-health-insurance-agenda/
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