In the Q&A following his speech today Bernanke said mark to market accounting caused additional stress as it “forced sales into very illiquid markets lead to reductions in prices of assets which lead to more write-downs which then lead to more fire sales”
Mark to market accounting he said requires “assets to be valued at their market price in orderly markets”.. he went on to say that mark to market accounting did not envision situations where otherwise normally marketable assets would not have markets or that the only sales would be under very extreme or distressed conditions”.
Although he said a return to the previous method would not happen he did say that he envisioned changed to the current mark to market method to compensate for situations like the one we are in.
Visit the ValuePlays Bookstore for Great Investing Books
This work is licensed under a Creative Commons Attribution 2.5 License.