Continuing Destructive Policies
Steve Forbes is at it again – He makes a simple and rational case in his article, Obama Repeats Bush’s Worst Market Mistakes. He says,
The most disastrous Bush policy that Mr. Obama is perpetuating is mark-to-market or “fair value” accounting for banks, insurance companies and other financial institutions. The idea seems harmless: Financial institutions should adjust their balance sheets and their capital accounts when the market value of the financial assets they hold goes up or down.
This has some politcal point scoring in it, but is good on the basics.
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It seems to me that a suspension or significant modification of “mark to market” rules would result in a sudden drop in interest rates as banks would be willing and able to lend but borrowers would not be emotionally ready to take on more debt.