NEW RULES - FINANCE RULES
Mark-to-Mike: Reassessing myself
By Michael Silverstein
Last week, the Financial Accounting Standards Board (FASB), which determines how we measure value in the material world, made a major rule change. Prodded by that noted statesman and keen economic thinker Rep. Barney Frank of Massachusetts, the board changed the so-called mark-to-market rule in a way that will dramatically improve the look of bank balance sheets.
Mark-to-market is a simple concept: You value the assets on your books at their current market value. The new rule, however, would allow banks far more leeway in this regard. They could opine that some of their assets are really worth more than the market says they are. They could thereby increase their reserves, which in turn would allow them to lend more to businesses and consumers, at least theoretically.
This change bothered me at first. I was reminded of how strongly Adam Smith emphasized the importance of consistency when it comes to valuing assets, noting the inherent dangers in changing measuring standards to accommodate near-term challenges. FASB, I thought, had ushered in mark-to-made-up, or maybe even mark-to-Madoff.
But then I realized how a bit of inconsistency in valuing assets could better my own life.
Certain difficulties - too painful to enumerate here - have caused a sharp devaluation of my credit score. By simply applying FASB thinking to this score, however, I would qualify for additional borrowing.
This would turn me into the shop-till-I-drop consumer I used to be, advancing the Obama administration goal of reanimating the market with additional spending. If other consumers also did a bit of credit-score revaluation, the economy would be bubbling again in no time.
There's also the business of my house. Who says it has depreciated just because the surrounding properties are boarded up and regularly visited after dark by people who like to party? The market? What does the market know?
I say the value of this house has actually gone up - because I think it has gone up. So enough with the foreclosure notices. Give me a third mortgage on the place, based on my own higher estimation of its worth.
Lots of taxes are based on someone else's asset valuations. So are alimony payments. But what do tax collectors know? And who says some judge knows my real worth better than I do? Just give me a pocket calculator and watch me FASB my way to solvency.
Look my way, Barney Frank. Do for me what you did for the banks. I don't want a government handout; that's socialism. Just give me the right to reassess everything I own or owe, and I'll consider myself fully bailed.
America is the only country that went from barbarism to decadence without civilization in between. Oscar Wilde