As the mechanic would say ... Here's your problen

[OmahaBlueDog]

This article (below) from Slate is from April ... months before the "meltdown"

http://www.slate.com/id/2187880/

<<According to a small but powerful group of America's financial decision-makers—mostly supply-siders and those in their thrall—the chief cause of the credit market meltdown is not folly, or reckless lending, or the demise of America's financial management. It's an accounting rule.

"Mark-to-market" is a seemingly innocuous term for the requirement that companies, banks, hedge funds, mutual funds, and the like report the market price of the financial instruments they hold and trade. (Here's some good background from Morningstar.) Mutual funds that own stocks make such a report every day. Publicly held firms like Bear Stearns must do so at the end of every quarter, and hedge funds must do so on a rolling basis to reassure their creditors that the assets they've put up for collateral are still worth something. Mark-to-market is thus crucial to the functioning of transparent markets.>>

If any of this sounds familiar, it should (This article is from the "Online Journal of Accountancy":

http://www.aicpa.org/PUBS/jofa/apr2002/thomas.htm

<<THE ROLE OF MARK-TO-MARKET ACCOUNTING

Enron incorporated “mark-to-market accounting” for the energy trading business in the mid-1990s and used it on an unprecedented scale for its trading transactions. Under mark-to-market rules, whenever companies have outstanding energy-related or other derivative contracts (either assets or liabilities) on their balance sheets at the end of a particular quarter, they must adjust them to fair market value, booking unrealized gains or losses to the income statement of the period. A difficulty with application of these rules in accounting for long-term futures contracts in commodities such as gas is that there are often no quoted prices upon which to base valuations. Companies having these types of derivative instruments are free to develop and use discretionary valuation models based on their own assumptions and methods.

The Financial Accounting Standards Board’s (FASB) emerging issues task force has debated the subject of how to value and disclose energy-related contracts for several years. It has been able to conclude only that a one-size-fits-all approach will not work and that to require companies to disclose all of the assumptions and estimates underlying earnings would produce disclosures that were so voluminous they would be of little value. For a company such as Enron, under continuous pressure to beat earnings estimates, it is possible that valuation estimates might have considerably overstated earnings. Furthermore, unrealized trading gains accounted for slightly more than half of the company’s $1.41 billion reported pretax profit for 2000 and about one-third of its reported pretax profit for 1999.>>

So, for all the posturing and so-called reform after Enron, it doesn't look to me like we learned a damn thing. Maybe it's just me.