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Change mark to market accounting and it should solve some of that problem. Part of the TARP made provision for the SEC to do this but they have done nothing with it to this point.
True, the mark to market is a major contributing factor to the red ink. But changing this is way too easy of a solution for the talking heads in Washington. Unfortunately, it won't happen. Hope I'm wrong.
You can point the finger at mark-to-market, or you can point the finger at asset-smoothing and mark-to-model in years past as not being transparent. It's difficult to say simultaneously that we're both too transparent and not transparent enough.
I think you're right, that Treasury's recent relaxation of the standard allowed asset smoothing again, so one has to wonder what the incentive is to stick with mark-to-market.
It definitely raises the prospects of banks "staying poor" to indulge in the bailout funds they supposedly "didn't want."