The Problem with Mark-to-Market
In an interview with Nicole Arnaboldi, chairman of Credit Suisse Group's DLJ Merchant Banking Partners, she notes
We're seeing unbelievable variances in where people are carrying assets
and where sale prices are. One example is a hedge fund that bought a
bank loan for 10 cents on the dollar in the secondary market, and
shortly afterward another firm bought the same security at 45 cents on
the dollar, while others hold it at 100 cents on the dollar. So what's
the mark-to-market value on that?
I have come around against mark-to-market, or at least the way it is implemented today. I was once a fervent supporter, but I think there are problems when assets are being sold into illiquid markets.
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