The econiverse is skeptical of today's mark-to-market decision and rally. James Kwak:
Today the Financial Accounting Standards Board voted - by one vote - to relax accounting standards for certain types of securities, giving banks greater discretion in determining what price to carry them at on their balance sheets. The new rules were sought by the American Bankers Association, and not surprisingly will allow banks to increase their reported profits and strengthen their balance sheets by allowing them to increase the reported values of their toxic assets...I don’t know any of the back-room dealing, but it seems like the banking industry is taking advantage of the confusion to push through a change it wants, because it will make it easier for banks to massage their balance sheets and harder for investors to see what is really going on.
A reader adds:
The traders just got a big rock of crack. This is called a bear market bubble, and it's going to do damage. The fact that stocks still went up significantly in spite of rather horrifying unemployment numbers coming out the same day tells you: a big rock of crack.
One can never know for sure why the stock market does what it does on a daily basisit could just be excitement about those Sizzling G-20 Wivesbut the fact that financial stocks are up more than the overall market would seem to indicate that there's something to the FASB-did-it explanation.
There is of course something very weird about this. Investors seem to be saying: Banks now have permission to lie to us more, so let's bid up their stock prices! Then again, if investors are that dumb, maybe it makes sense for accountants to pay less attention to market prices in valuing the assets on banks' books.
Unbelievable the amount of spurious silliness being spewed about mark-to-market today. People have their facts wrong -- most financial services mark a small percentage of their assets to market today; GE Capital is at 2% -- and we are giving banks a pass in terms of how they report losses and value goofy assets.