Friday, February 6, 2009
Bury the dead
This would mean that banks don't have to write down assets until they actually go bad. At presents banks have been going bust on the basis that their assets marked to market represent a huge loss killing their capital adequacy. Given that capitalism only works as an act of faith and faith is impossible if there is too much reality, there is a precedence that hiding things can work. I've heard someone compare mark to market as the equivalent of the gold standard in the current scenario. If this had been suggested on the upwsing when banks were revelling in the incredible apparent profits that mark to market gave them, I'd have been totally in favour. It would have actually helped stop the bubble inflating.