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Monday, September 22, 2008

WHY MARK TO MARKET? FROM National Center for Policy Analysis

"Mark to market accounting, which forces firms to revalue their assets to current market values even when the market is frozen or dysfunctional, and even when the assets could be held to maturity and redeemed at face value, could be the prime suspect in the downward spiral of our credit markets, says Bob McTeer, a distinguished fellow with the National Center for Policy Analysis.

For example, if a bank loan goes into default, it makes sense to write it off the books. However, if a security trades lower because market interest rates have risen or because of problems in the market itself, requiring an immediate write-down is unduly harsh, continues McTeer."


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