Will 'mark to market' accounting take the fall for the Wall Street mess?
(Fortune Magazine) -- Mark to market is a business rarity - an accounting term that draws reactions from people who don't know spreadsheets from bedsheets. Mark to market, which we'll call MTM, evokes images of Enron's made-up profits and the other corporate scandals that marred the first years of this decade. Not pretty.
Now MTM - which means valuing marketable securities at market prices - is a hot item again, but for the opposite reason. This time financial companies and their allies are claiming it's too strict. They argue that marking the value of complex, illiquid securities to artificially low market prices has unnecessarily crippled the U.S. and world financial systems by creating billions of illusory losses on perfectly fine (albeit illiquid) securities, such as collateralized debt obligations linked to mortgages. Markets for these things, the argument goes, are depressed way below true economic value.
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