Comments on: Mark-to-Market Accounting and the Financial Crisis

By: IFRS

IFRS — Wed, 03 Mar 2010 16:13:05 +0000

Without question, your posts always makes for a good wakeup call. Thank you for sharing the community with a reason to stop and thing.

Despite what some people grumbe, you have to believe that the common theme of unified standards has merit.

There is a clear need for further implementation options, though convergence in one manner or another would be awesome, especially for the M&A community.

By: admin

admin — Fri, 19 Feb 2010 06:29:00 +0000

Aetius – I share your peeve! My post was just a small attempt at countering the overwhelming weight of commentary against MtM, as well as pointing out that those who argue against MtM usually have a vested interest against it.

By: Aetius Romulous

Aetius Romulous — Thu, 18 Feb 2010 22:46:10 +0000

Viewed from a strictly accounting perspective, the whole notion that accounting standards can be a moving target dependent on an unfavorable situation is not just an oxymoron, it’s insane. It’s stuff like this that gets in the way of a universal accounting standard which makes an apple an apple anywhere in the world.

Sorry. Pet Peeve.

By: admin

admin — Wed, 10 Feb 2010 22:49:54 +0000

Thanks David. I hadn’t read your post but I could not agree more with the idea that investors need to be made aware that money market mutual funds are risky investments.

So much of the financial intermediary sector represents an exercise in alchemy – the liabilities are liquid and “risk-free” whereas the assets are illiquid and risky.

By: David Merkel

David Merkel — Wed, 10 Feb 2010 05:24:21 +0000

MR — another great post. I took a lot of heat for saying things like this. Many complain about the procyclical effects, but few note that most of the companies in trouble had liquid liabilities and illiquid assets. We should not blame MTM for liquidity mismatches.

Beyond that, you may have seen my proposal for MMMFs and Stable Value Funds.

http://alephblog.com/2008/10/04/a-proposal-for-money-market-funds-and-more/

There are ways to create mostly safe assets, mark assets to market, and still have market stability — we just have to be creative and disciplined. My time in the insurance industry taught me how to structure incentives for customers, while not giving away free options.