Caused by Wall Street’s own logic, by the progress of things in Washington, or by signs that Mark to Market accounting rules will be suspended soon? (If done, the latter will instantly improve bank balance sheets, at least in the near term, and thus improve their credit ratings, and perhaps, as a result, open up capital markets. Megan McArdle had an interesting reflection on Mark-to-Market rules. In normal times, the rules might make a great deal of sense, but in a financial squeeze, they can create a domino effect the freezes up financial markets).
Wall Street’s own logic
There is no such thing. Market + Logic = socialism.
Mr. Adams writes, "If done, the latter will instantly improve bank balance sheets, at least in the near term, and thus improve their credit ratings, and perhaps, as a result, open up capital markets."
A dangerous approach, Sir. McArdle's article "hits the nail on the head," squarely.
If we allow businesses to continue to misstate the value of their assets - to lie about their worth - then we have investors, regulators and others making decisions on incorrect data.
For the regulated businesses, oftimes a key reason they own securities and financial assets is that regulation and/or common sense obligates them to maintain "reserves." What are "reserves" for? To be used in case of a severe, unexpected need. In short, if these institutions must rely on their reserves, they'll do so in the market - whether it is illiquid or not.
Elmination of mark-to-market rules only will serve to extend the fantasy so many institutions were living - that all is well, that the loans being made are "good," and that management is doning an acceptable job.
The economy doesn't like it, but when we live a lie there is always a "day of reckoning."