On Oct 4, 2008, at 5:58 PM, Gar Lipow wrote:
> One thing that the left and right seemed to agree on is this "Mark to
> Market" thing. Doug, or someone who knows - is this as
> counterproductive a quack nostrum as it seems? Or is there a net
> benefit for someone besides wall street in letting banks inflate their
> estimates of asset value again? Isn't this kind of thing part of how
> we got into this mess to begin with.
Suspending mark to market is a kind of "forbearance" - regulatory indulgence that has proven disastrous in the past. The hope is that if you just look away things will get better on their own, but they don't. Much of the 1980s was spent treating the S&Ls in this matter, and it only made the wreck bigger by the end of the decade. It was amazing to see Reagan's FDIC head Bill Isaac emerge from the woodwork with a "regulatory capital certificates" version of forbearance - and the Dem left (e.g. DeFazio) embraced it. Nutty.
Doug