I'm Rich, I Tells Ya! Rich!

The banks want to value their assets not at the price they could be sold for now, but for the price they could bring at some future date. The rule that they have to price assets at today's price is called "mark to market." The Securities and Exchange Commission apparently will change that to "mark to maturity" or "you can price your shit to whatever you think you can get for it in the future."

Articles: One, two, three, four.

Let me give an example of how this works: I have a car. According to the Kelly Blue Book's website, the trade-in value of the car is $11,000 and the private sale value is $13,000. That would be the "mark to market value."

But maybe I plan to hold onto the car for twenty years. Maybe I also anticipate that I will be famous. The car may then be a collector's item, since it will have verifiable provenance. I project that around 2028, the car will be worth at least a pasta bazillion dollars. So, under the "mark to maturity" rule, I can book the car at a pasta bazillion dollars. I can do that with all of my stuff. So since I figure I can sell everything I have at some date far in the future for a shitload of money, therefore, I am now worth a shitload of money.

That is, of course, nonsense. What something is worth is what a willing buyer in an arm's-length transaction will pay for it. Not twenty or fifty years in the future, but today. The banks may not like the "mark to market" rule, but it is the rule everyone else lives by. If they can get around the rule, then the balance sheets of the financial institutions will be as overblown and as fictional as Sarah Palin's resume.

Worse, nobody will trust the banks and their real asset value will be close to zero. Things could get far, far worse.