My question is, I heard some lawmakers on the news this morning saying that changing the Mark to Market accounting rules would help the credit crisis more than the "bailout" would. So, my question is, if they make these changes they’re recommending, what would change?
I know that mark to market accounting was how Enron was able to pull its shenanigans. New rules (Sarbanes-Oxley) were put in place as a result.
So are these guys proposing going backwards and advocating for deregulating the market again, which got us into this mess to begin with, or are they proposing more regulation?
What I'm reading seems to make sense, that whatever assets a firm owns have to be marked every day to thier value on the current market. And Enron used that process to inflate their assets so they could borrow a lot more money. And Sarbanes-Oxley was supposed to fix that problem, but lots of Mark to Market accounting is still out there.
Beyond that, I'm a little confused. They say that "Suspending" mark to market accounting will help this problem. I can see that. If you're in real estate and the prices of houses is falling, you have to mark all of your assets down to those new prices, which keeps you from being able to borrow more money to keep your business going.
These "experts" make this sound like a good thing? Is it? Once again, are they proposing more or less regulation?
Help me get past the doubletalk please!