Finally! Changes to Mark to Market are coming. The Financial Accounting Standards Board (FASB) voted favorably to relax mark-to-market and help financial institutions. Financial companies will now be allowed to use alternate models, like cash flow analysis, in marking their assets. No longer will institutions be limited to using last-sale data in marking assets. This enormous change will significantly reduce the write-downs banks have been taking on investments like mortgage-backed securities. You can revisit my blog post of December 29, 2008 to learn more about mark-to-market and its impact on our current environment.
This change to mark to market is effective for the second quarter, but can applied to first quarter earnings. Rumors are swirling that this change will boost earnings of banks by 20% or more in the first quarter. It is too bad that it has taken so long for this enormous issue to be fixed. But finally Congress stepped in demanding a revisit to this concern and common sense prevailed. Stocks are loving this news, but as you might imagine, the Bond market is suffering. Look for interest rates to be a bit worse today on this news.
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