Miller: Dump the Mark-to-Market Rules

Conclusions

AIG did not get the time to shop around its valuable business lines. How long does it take to get some reasonable bids for something like an airline leasing business?

Rules made by independent groups like FASB have important public policy implications. Accountability in a democratic society requires oversight of these boards. It is especially important in times of stress.

Government intervention might not be necessary if private entities were not punished for stepping in.

The government actions will probably not result in massive losses for taxpayers, despite the hype. There may even be gains.

Observers should balance costs with public purposes and systemic consequences when evaluating government intervention.

And finally, the FAS 157 rule did not cause the credit market problems. The causes -- opaque instruments and flawed rating systems -- are well documented. Having said this, the rule is a hindrance to the effective use of private markets to resolve the problem. It should be suspended, at least for a time. The U.S. will probably join the rest of the world in abandoning it entirely as part of the move to international accounting standards, so why punish ourselves now?

Investment Implications

If the groundswell of opinion gets more traction, it would be a bullish event for investors. One important step would be more balanced treatment by the loud and powerful voices in the investment media.

The problem is that one side of the case is easy and popular. The other is more technical and runs against the grain for all of us who mark our positions every day.