Warren Buffett on MTM

Here is a sensible view of mark-to-market from none other than Warren Buffett.  He weighs both sides of the debate.   While he’s not for suspension of mark-to-market, he proposes the best way to handle mark-to-market is to continue to report those market figures to investors, but not write-down capital based on these numbers.  Exactly Warren!

Additionally, one of the greatest investors of our time is stating that at their current market prices, some of these “toxic” assets – distressed mortgages – represent the best potential returns going forward because they are trading below fair value.  This is further evidence that the market, or liquidation value of many of these securities is well below their true economic value.

Conclusion: Mark-to-market accounting rules are forcing banks to write their securities down to values well below their economic value.