MTM Asset Values

"A new accounting rule set to be approved this week will relax mark-to-market rules for banks sitting on billions of dollars in toxic assets, making it more attractive to keep those assets on their books. Yet those changes may undermine a larger US Treasury plan to rid the banks of those same assets, bankers and accounting experts say. The [FASB] is proposing significant changes to its [MTM] rules, allowing banks to set their own values for certain hard-to-value troubled mortgages, corporate loans and consumer loans. The new proposal, called FAS 157-e, is scheduled for a vote this Tuesday. ... Once the new accounting rule takes effect, banks will have a new incentive to keep the assets directly on their books, say bankers. That is because the rule states that banks can use their own judgment on asset values as long as there are no willing bidders to set a market price. ... 'There is a disconnect between the two plans,' said Robert Willens who follows tax and accounting issues for the Willens Report. ... If approved, FAS 157-e will give banks more leeway to determine what constitutes a 'market'," Heidi Moore at the WSJ, 1 April 2009.

Indeed. This new accounting principle is a joke. It reminds me of "regulatory forbearance" during the S&L crisis.