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Essay / Research Paper Abstract
This 8-page paper discusses how the concept of mark-to-market valuation, also known as "fair market" valuation, might have contributed to, and could be prolonging, the current financial crisis. Bibliography lists 4 sources.
Page Count:
8 pages (~225 words per page)
File: D0_MTmarktomark.rtf
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Unformatted sample text from the term paper:
institutions who sliced up mortgages then sold them to other greedy financial institutions and companies, to very lax underwriting standards for home loans, to home owners who should have known
better than to buy more house than they could afford, to home builders that should have known better than to build more and more homes to fuel what looked like
an insatiable demand. As everyone knows, the house of cards collapsed - mortgage values fells, no one wanted the securities, homeowners
defaulted on loans, too much inventory remained on the markets and all of this worsened what was a mild recession into a more serious Recession.
However, lost in all of this is the concept of mark-to-market accounting, also known as "fair value." Mark-to-market is a tricky tool, as it depends a
great deal on a market value of a particular asset which may, or may not, be set in stone. Some point out that mark-to-market was one of the culprits in
the collapse, while others say this tool is causing the current economic woes. But most agree that mark-to-market was a definite culprit. Definition: Mark-to-Market
In any kind of financial reporting, publically traded firms are required to divulge the value of the entire cadre of assets, even those that arent liquid. The
problem comes in, however, when there is no specific value for an asset. For example, its fairly easy to value real estate; more often than not, a specific value can
be assigned to it, whether it be the assessed value from the countys district or a benchmark value. Other assets, however, arent quite so straightforward when it comes to valuation.
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