FASB mark to market guidance MONDAY MORNING - announced on cnbc after the mkt close.

S

seasideheights

This will make for an interesting open for the financials Monday.


Fair value measurement (estimated 90-minute discussion). The Board will discuss additional application guidance that would clarify how fair value measurements are determined in a market that is not active, consistent with the principles of FASB Statement No. 157, Fair Value Measurements. The Board also will discuss how best to present other-than-temporary impairments in the financial statements.


http://www.fasb.org/calendar/index.shtml
 
The funny thing about this M2M issue is if they are "illiquid assets" then that means no one wants to buy them and if no one wants to buy them then the value is actually pretty easy to understand. It's so easy you don't even need a calculator to value them. It <b>freaking zero!</b> Mark this shit down to zero and let's get done with it :mad:
 
the reason there are illiquid assets is not because they are worth nothing. It is also not because no one is willing to buy them. There are plenty of willing buyers at a certain price. The problem is that price is lower than the banks are will to sell them for. In other words, the bid/ask spread has blown out too wide for trades to take place.

Why is this occurring? There are a few reasons. First of all, the government has opened the possibility of buying these assets, but has not yet committed to it. The banks believe the price government will pay for the assets is higher than the current private bidders, and thus they won't sell unless the Govt rules out buying crap assets.

Second reason is b/c of Mark to Market. If any of these toxic assets trade at the current bid, the banks will have to mark all of these bad assets to that price. If this occurs, the banks will most likely be insolvent (think Asset-Liabilities=equity) So the idea is relax mark to market so that all assets don't have to get marked at sale price, and get them trading again. However, this will only work if the assets actually appreciate in value, or else the banks are actually insolvent. The measure only buys time, but point is, the assets are not worth 0, and there are buyers for them.
 
Quote from santosLhalper:

the reason there are illiquid assets is not because they are worth nothing. It is also not because no one is willing to buy them. There are plenty of willing buyers at a certain price. The problem is that price is lower than the banks are will to sell them for. In other words, the bid/ask spread has blown out too wide for trades to take place.

Why is this occurring? There are a few reasons. First of all, the government has opened the possibility of buying these assets, but has not yet committed to it. The banks believe the price government will pay for the assets is higher than the current private bidders, and thus they won't sell unless the Govt rules out buying crap assets.

Second reason is b/c of Mark to Market. If any of these toxic assets trade at the current bid, the banks will have to mark all of these bad assets to that price. If this occurs, the banks will most likely be insolvent (think Asset-Liabilities=equity) So the idea is relax mark to market so that all assets don't have to get marked at sale price, and get them trading again. However, this will only work if the assets actually appreciate in value, or else the banks are actually insolvent. The measure only buys time, but point is, the assets are not worth 0, and there are buyers for them.
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so who is right and who is wrong? banks overleveraged and overvalued assets. hoping for a recovery in prices could compromise deposits.

delaying the bottoming process by changing accounting rules is not going to get toxic assets trading again. default risk doesn't change because some beancounter waves his magic wand
 
You're preaching to the choir. I'm just saying the logic behind relaxing mark to market is you allow the banks to trade these assets at low prices, and hope and pray that the values of these assets will increase. It's the same with all of these plans. Pump the hope, dump the reality. But my real point was that these assets are not worthless, nor are there no buyers. There is simply a large difference in what buyers are willing/able to pay and what sellers are will to receive. m2m reform solves the "able to" portion of the problem for the short term future.
 
Quote from santosLhalper:

You're preaching to the choir. I'm just saying the logic behind relaxing mark to market is you allow the banks to trade these assets at low prices, and hope and pray that the values of these assets will increase. It's the same with all of these plans. Pump the hope, dump the reality. But my real point was that these assets are not worthless, nor are there no buyers. There is simply a large difference in what buyers are willing/able to pay and what sellers are will to receive. m2m reform solves the "able to" portion of the problem for the short term future.
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Help me understand why a reform may make a positive difference. If a reform ensues and m2m does not have to be extended to the entire portfoltio of bad assets enticing banks to start trading, the assets being offered will still carry a low bid and once sold it will be apparent -although not in the books- that the entire portfolio is confirmed crap, only relying on future higher bids that may save the day. They may not be insolvent on day 1, but they will be continually insolvent on everyone's estimation.

How does changing this measure increase the value of the bad assets?
 
You are exactly correct. Have you noticed a similarity in every action the government takes? Pump the hope, dump the reality. This is no different. We are f.ucked regardless. Giving taxpayers 600 bucks, building bridges, handing out more foodstamps, banning shorting, reinstating the uptick rule, relaxing mark to market; temporary bounce, then reality sets in. But the idea is to relax M2M, let the crap trade, the stuff start increasing in value, banks start writing up assets, all is well. If it seems far fetched, that's because it is. Doesn't mean it won't buy time.
 
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