Shame

From Bloomberg: Bernanke Signals U.S. Should Pay More for Bad Debt.

Federal Reserve Chairman Ben S. Bernanke signaled that the government should buy devalued assets at above-market values to make its proposed $700 billion rescue package most effective in combating the financial crisis.

``Accounting rules require banks to value many assets at something close to a very low fire-sale price rather than the hold-to-maturity price,'' Bernanke said in testimony to the Senate Banking Committee today. ``If the Treasury bids for and then buys assets at a price close to the hold-to-maturity price, there will be substantial benefits.''

Analysts said Bernanke is essentially advocating that government use a pricing model that assumes that the debt will be paid in full over a long period of time. That is different from the mark-to-market model used by investment banks that prices assets at what they are worth on a given day.

Bernanke opposed efforts by banks to lobby regulators to remove mark-to-market pricing in their portfolios. A suspension of such accounting would hurt investor confidence, he said.

``They are basically saying, `Let's take a best-case scenario, let's assume we don't have losses,''' said Julian Mann, vice president at First Pacific Advisors LLC in Los Angeles. ``Home prices continue to deteriorate. There are real losses here.''

The whole thing is beyond moronic.

Mark-to-market is real. It's as real for Bill Gates as it is for you. What someone else is willing to pay this morning for your crap whether it's your used underwear or Morgan Stanley stock is real. And you'd better believe it!

In any case, banks must mark-to-market so that investors have confidence but the US Treasury doesn't require confidence?

Surely you jest, Professor!

I've never been more ashamed in life as a former academic.