Investor concern about Wachovia intensified on Friday after JPMorgan said it would take a $31 billion write-down on loans it acquired when it took over Washington Mutual Inc's banking unit on Thursday.
One of the biggest issues facing anybody with an interest in the financial sector is this: what is the actual value of the company? Mark to market forces a company to acknowledge reality by providing market determined prices for its assets. The idea that the SEC needs to study mark to market is ludicrous. What is essentially being asked is "how much can we lie to shareholders about the value of our assets?"
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On this point, I think mark-to-market is having an exaggerated effect on the downside of valuations. Sentiment is so negative that many in the market are putting an extremely low value on almost everything. The market needs to find the true price of assets (even beaten-down ones) and I think it's overshooting to the downside - contributing mightily to the freeze-up of money market.
yes, the current low valuations may be as imaginary as the high valuations of a few years ago.
Even the Financial Accounting Standards Board’s couldn't figure out how to deal with the mark-to-market accounting shortly after the Enron debacle. Even the Arthur Andersen accounting firm had problems with it which led to its failure too. Enron filed for bankruptcy 2001. The Financial Accounting Standards Board’s has had 7 years and they did nothing. nomedals.blogspot.com
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