You’ve probably heard this expression bandied about in recent months, but may not have been entirely clear on its meaning. If so, Marketplace® Senior Editor Paddy Hirsch goes to the whiteboard to provide the following explanation:
It’s worth understanding a little better because one of the more significant developments arising from this week’s G20 Summit in London was the decision to change U.S. accounting rules so as to move them away from the “Mark to Market” principle and thereby effectively “fix” the balance sheets of banks damaged when the housing bubble collapsed. All of those “toxic assets” sitting on their books can presumably now be valued at whatever the banks imagine them to be and claim they’re worth. Cool deal — for the banks!
There are different conclusions one could conceivably draw from this depending on the motives ascribed to various parties involved, and the particular ideological construct (political/economic) used to evaluate it. On the one hand it could be argued that it undermines the intent of Treasury Secretary Geithner’s “public private partnership investment program” that purportedly attempts to free up credit and recapitalize technically insolvent banks by arriving at some reasonably objective market value of their assets, but it could also be seen as an inventive way of hitting the reset button that wipes out the banks’ debt at taxpayer expense while allowing them to profit from the subsidized re-purchase at auction of their now artificially overpriced assets.