Thursday, March 26, 2009

Mark-to-Market Again

We now have yet more evidence that MTM accounting is hardly the problem here. Not only are the big banks not being forced to write their assets down to fire sale prices, they are barely writing them down at all. Zero Hedge refers to a Goldman Sachs report that shows banks carrying most of their assets at 90% of face value or better (oops, that's face value - last 12 months charge-offs - reserves). How long will it be before the market will actually pay that much? The banks may try to hold much of this to maturity and hope defaults going forward are low. In addition, these numbers wouldn't necessarily look crazy if the banks already had huge loss reserves built up but I wouldn't bet good money on that.



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