[Edit35]

As much as I disdain Obama and Geithner, this toxic asset plan makes some sense in that it psychologically moves big money investors into getting back into the market, and to begin lending again.

It is about the only thing the govt. could do to try and break the log jam at the banks and financial institutions.

Currently, these banks cannot raise any capital because the mark to market rule caused their values to plummet, in some cases down to zero.

Yes, they could cancel the mark to market rule, but they still would be billions and trillions in debt with little chance of selling the mortgage backed asssets at anywhere near what they paid.

doing nothing would just cause the market to sit stagnent for another two or three years, maybe longer.

[genghis]

The banks aren’t lending because balance sheets are messed up. it isn’t a credit crisis, it is a balance sheet problem. You do not lend when people are losing 20 trillion dollars.

[jveritas]

Oh please, why are the investors going to buy these bad assets now? Why they did not buy them form the beginning? Who was preventing them from doing so?

[bert]

......they could cancel the mark to market rule.....

If the rule is canceled, how will the assets be remarked?

One fact involved but not often noted is that it is only possible to establish the value of any specific asset at the time of sale. This means that the historical value has always been wrong at any given moment. If it is necessary to deal with a company on the basis of asset valuations, some evaluation must be made on the basis of all available information.

That is the definition of what the market does. Assets should be valued at the price of the last sale and leave the market to make an evaluation.