SEC Issues Clarifications on Mark to Market Accounting
The SEC just released this statement clarifying that alternatives to mark-to-market may be used when there is no active market for a security or the only transactions in the market are distressed sales.
SEC Office of the Chief Accountant and FASB Staff Clarifications on Fair Value Accounting
"When an active market for a security does not exist, the use of management estimates that incorporate current market participant expectations of future cash flows, and include appropriate risk premiums, is acceptable."
"Distressed or forced liquidation sales are not orderly transactions, and thus the fact that a transaction is distressed or forced should be considered when weighing the available evidence."
I believe this will help free up the credit markets a bit. Under mtm, banks may be carrying more reserves than they otherwise would to protect against a distressed security sale setting a new, lower price for securities. I know it's not a cure for the problem, but it does help take some uncertainty banks have about getting back to lending off the table. And it costs a whole lot less than $700 billion.