Irish Mortgage Brokers Blog

There is so much controversy over bank assets at the moment and calls for banks to accept whatever writedowns are coming, the way that assets are valued currently are via a system called ‘mark to market’. And what this does is place the value of an asset as whatever it will sell at, which makes sense, but in exceptional times often there is ‘no market’ or ‘artificially reduced market’ and thus assets can be valued far beyond what is considered reasonable true value - to some, not everybody agrees with this assertion. The reason why ‘marking to market’ may not be good is in the second video

Capital destruction in the banking system magnifies the economical issues we are seeing, and the video above argues several very valid points, however, for the time being the only way to determine a price of an asset is to mark it to the market, that is the natural route of capital markets and one agreeable in any regular situation, however, desperate times call for desperate measures and while a suspension of marking to market is a distortion, there are many who would rather face the unintended consequences than face the present pain and they may have a point.