Mark to Market

Mark to Market is an accounting rule (FASB 157) that stipulates that securities must be valued at their current price, rather than the purchase price or the price they might be sold for later. Also called "fair value,” it requires recording the value of an asset on a daily basis according to current market prices.

Mark to Market became a hot topic as the financial markets went into a tailspin. When the market value plummeted for toxic mortgage-backed securities, some bankers argued that mark-to-market accounting was to blame for their write-downs and for falling consumer confidence.

As part of the $700 billion bailout legislation, Congress authorized the SEC to temporarily suspend the mark-to-market accounting rule. Those who want to drop mark-to-market accounting claimed that it created an insolvency crisis for banks. But others agree that accounting approach reflects reality saying that if a company has made a bad investment that no one wants to buy, its fair value should be low.

For details on how Mark to Market works, see our reportWhat to Make of Mark to Market.