Under current accounting rules banks may book an asset, such as a loan, at its initial book value until that transaction is completed, either profitably or not. That should change. If banks were required to "mark to market" all of their assets, the bad ones as well as the good ones, they would have to increase their capital reserves to cover anticipated losses. The private, nonprofit organization that oversees financial accounting standards has proposed such a reform, which would work like an automatic brake on risky lending.”
Read the full article on: Rapid City Journal