It’s at least worth looking at. Â I was listening to Dave Ramsey this afternoon, and he mentioned the possibility of suspending the mark-to-market rules for the subprime industry temporarily. Â After all, there isn’t actually a 78% default rate on mortgages is there?
In other words, mark-to-market accounting–not the reality of the economy or the actual credits–has created much of the financial turmoil that has shaken the world. Imagine if you had a $200,000 mortgage on a $300,000 house that you planned on living in for 20 years. But a neighbor, because of very special circumstances, had to sell his house for $150,000. Then, imagine if your banker said you had to mark to this “new market” and give the bank $80,000 in cash immediately (so you would have 20% down) or lose your home. Would this reflect reality? Not at all. Would this create chaos? Absolutely.
And it is happening all over Wall Street.
If you’re as disturbed as I am about having this bailout crammed down your throat based on fear, contact your representatives and mention the possible alternative of suspending mark-to-market rules temporarily. Â While that may not be the ideal situation, it’s better than every man, woman, and child in the US ponying up $2,500 of debt to bail these guys out.
I’ll update this post later with a link to a podcast that explains how this would work.Â Â Here’s theÂ Dave Ramsey Podcast