Bank Asset Valuation-MARK TO MARKET IS DOWRIGHT STUPID

What the heck is MARK TO MARKET bank asset valuation?

This term is something that only our politicians could come up with, no normal person would ever use this terms or use its valuation method for anything in the "real" world.

Mark to market exists only to make a lot of needless small print on financial statements of banks. It makes a lot of work for accountants and lawyers and regulators, but to the rest of us normal folks, it is another useless term, that results in needless manipulations of financial firms.

This term has become more widely known as banks wanted to sell their "toxic" assets to the government and the government was wiling to buy them (another dumb move, as usual by the government).

Since the government expressed an interest in buying assets, that were purportedly "bad", the sellers, financial firms that held various hard to value assets such as derivative contracts, needed to value these assets.

The way to value them was determined to be with the use of a formula called: MARK TO MARKET. This formula had a few problems, the largest of which was that there was NO WAY to value these "toxic" assets which consisted of various derivative contracts and similar financial arrangements.

In addition, other TOXIC assets were simply assets that had value, but it may not be assets that someone could or was willing to buy or price at today's date.

For example, if you were told that you had to determine a sales price for your home, TODAY, that someone had to BUY your home today, and only today, that price may be very different from its true value. If it was sold in an orderly fashion, not by the end of the day today, it would probably fetch a decent price, a true market price in a competitive market place.

Well this is the way the government wants the firms to value their assets...all to be at the MARK TO MARKET PRICE.

This is another example of nonsense from the government that under-values assets that when held to maturity or for the time they were intended to be held, would not show a loss and were intended to show a profit for the institution.

This loss is then passed on the the stockholders of the financial firms or banks who are arm-twisted to sell the assets to the government with a loss, and no chance of recovery.

What is the point to all this ?

The point is that the government just does not understand these contracts, and is causing its own problems that is translated into tax supported welfare for financial firms, who are forced to take a needless loss. This loss is translated into a lower value of the stockholders' investment, and a loss for the government as well, who may eventually again try to resell the assets it just acquired again for a loss.

The assets need to be held till maturity or till the unwinding of the contracts to see where they will stand. They can be carried at COST as they are now until maturity to truly reflect their values, without causing losses to either the financial institution or the taxpayers.