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Mullooly Asset Management

Fiduciary Fee-Only Financial Planner | Investment Advisor in Wall, NJ

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Could Suspending Mark to the Market Accouting Solve The Problem?

February 24, 2009 by Thomas Mullooly

Throwing good money after bad into these banks is not the answer.

Now, I don’t like changing the rules in the middle of the game.  But I still believe the almost-immediate fix for this entire mess is suspending “mark to the market” regulations.

Read this statement from news sources today: Citigroup declined to comment on talks with the government, but in an email said its capital base is very strong, despite $28.5 billion of losses in the last five quarters.

How could Citigroup lose $28 billion — and say they are very strong?
Believe it or not, it is TRUE.

They HAVE to book these losses due to “mark to the market.”  This is really important!  When a competitor has to mark down the value of bonds, mark-to-the-market means you must do the same thing on your books…whether you sell or not!

OK, true, these same banks made profits hand-over-fist when real estate was going up and they leveraged like crazy off it.  So, if you run your business that way, it’s going to be painful…no…near suicidal…when things are bad.

And that’s precisely whats happening now.

Now, a capitalist society says the weak will be extinguished.  OK.

So weak auto stocks should be wiped out.

Weak homebuilders have to go.

Weak retailers, see ya.

But banks provide the grease for the entire economy.  They should NOT be bailed out with cash.

Suspend mark-to-the-market.   Now.

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Filed Under: Asset Management

About Thomas Mullooly

Thomas Mullooly is owner and founder of Mullooly Asset Management, Inc. In 2002 Tom opened Mullooly Asset Management, a fee-only investment advisory firm. As an investment advisor, and not a broker, Tom works strictly for his clients. With the help of point and figure charting, Tom builds a realistic game plan for clients.

1971 State Route 34, Suite 102
Wall Township, NJ 07719

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The information on this website and blog do not involve the rendering of personalized investment advice. A professional advisor should be consulted before implementing any of the options presented. None of the content contained in this website should be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.

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