Under immense pressure from all sides EXCEPT Investors, the Financial Accounting Standards Board, caved to demands that they sanction institutions to 'Mark to Model', commonly known amongst investors as "Mark to MYTH".
Accounting Standards, the most commonly used grouping "GAAP" 'Generally Accepted Accounting Practices', allow you to have confidence that when you read a financial statement,
that commonly accepted meanings and valuations are ALL that used in creating them.
One such CONVENTION, in valuing INVENTORY, is valuing at at LOWER Or Cost or Marketable Value. So if GM has 1 million Chevy Crankshafts in inventory that cost $10 bux each to make, and they COULD sell them to Toyota for 20 bux ea, they could show 10 MIL in crankshaft assets. If the only market was say 5 bux per, then GM would have to value that Crankshaft Inventory @ 5 MIL. THATS NORMAL BEFORE F.A.S.B. 157 was modified here.
So now if your bank has some DEBT SECURITIES that cost it 10 MIL, but only have a market for 2 MIL, they can now show them at the value assigned them by say, a mathematical model, which may well value them at 10 MIL, when the Market Value is 2 MIL.
I guess you see the problem. We are now back to the days of the Robber Barons, where we'd have to "Buy Cows by Candlelight", not a good thing, as far as debt securities are concerned ! !
Meanwhile GM is stuck with its crankshaft inventory and has value them at LOWER of Cost or Market, whereas, JPM, GS, Your Bank, can value its debt securities by "MARKING TO MYTH"!
Yes, Virginia, THIS IS A PROBLEM ! ! !
So What Can You DO? You ask your BANK or WHOMEVER you like:
"WHATS IN YOUR WALLET" & "SHOW ME THE MONEY !", AND THEY SHOW YOU
what they actually have, and what the actual BIDS are for those items.
And if you get the snotty, smarmy or even polite answer: " We dont do that.", you simply thank them and remove your funds from said depository, or sell any stock you have in said institution or both, and move them to someplace less arrogant and high-handed with YOUR MONEY.
After all, ITS YOUR MONEY, MOVE IT WHERE YOU NEED IT !
If you are any less rigorous than this in pursuit of your capital preservation, it is probable that you will end up vampirized, IMO.
Maybe next time I will discuss where all this money is that represents the "LOST VALUE"
everyone refers to. HINT - this money and value exists, it was NOT destroyed, but that is another story.