Bailout News Video: Todd Harrison On FASB 157, Mark To Market Accounting And The Uptick Rule

This clip is a decent discussion of mark to market accounting and the uptick rule with Todd Harrison and Aaron Task of Yahoo's Tech Ticker.

Todd agrees with our position that neither rule changes will make any difference.

Does anyone really believe that financial institutions mark their assets correctly?

Simply, FASB 157, the heart of mark to market accounting, already allows for convenient lying.  There are 2 completely legal ways to circumvent the rules: stick the assets into Level 2 or Level 3 categories and make up your own valuation or keep the assets in Level 1 but mark them to fantasy by claiming that all other assets sold in this category by other firms were crisis sales.

The ability to lie is already built into FASB 157, so why mess with it.  As I have been saying for weeks, the better choice is to weaken regulatory capital levels.  See this piece on Jim Chanos for an outstanding discussion of the loopholes already present in FASB 157.

Comments

[Comrade Dope]

I read this article on Seeking Alpha. I appreciate the links you provided over there on mark to market. Very helpful.

[Short Squeeze]

I agree with Harrison's point but I thought he made a very weak argument.