The answer is both socio-economic and socio-political.
|How lowe can we go|
1. It needs to be understood first and foremost that Capitalism means that the individuals in the Private Sector own and control capital, production and fruits of their productivity, ingenuity, creativity and innovation, and that Socialism and its derivatives of Fascism (crony capitalism) and Communism (State Capitalism) is the systematic deprivation, undermining and usurping of the ownership and control of capital to the State, i.e., the US government. The bank regulatory mechanism through which the value relationship of assets to capital is determined is the regulatory basis or playing field for both Capitalism and State Capitalism. In this regard, hold to maturity accounting in the Private Sector, formerly FASB 115, is the regulatory basis for Capitalism within the bank regulatory mechanism, and mark to market accounting, FASB 157, approved by Congress in 2007 (and again October 2008), then, as required by law, approved by the Bush/Paulson SEC November 9, 2007 (upheld December 2008 and reasserted by Obama February 2009) for imposition on the Private Sector banks November 15, 2007, where the government and Federal Reserve retain the sole right to value Private Sector assets on a hold to maturity basis, is the regulatory basis for the transition of ownership and control of capital from the Private Sector to the government, a 4 to 5 year planned process of Executive Orders and Congressional reform legislation and regulation, openly discussed and called by the media as “Regime change” to a “New Normal,” in which the ability for the Private Sector to access credit without some form of direct (or via an owned or controlled government) guarantee program, is impossible.
2. Therefore, to properly understand, the differences between mark to market accounting (FASB 157) and hold to maturity accounting (FASB 115), one needs to understand the regulatory basis within which these 2 have their socio-political-economic impact. The economics of the bank regulatory mechanism is entirely different from economic theory, hypothesis, interpretation, spin, opinion presented as fact provided by economists according to the political interests that pay them, using their interpretation of data to support their projections regarding the economy and society. You can say that the economics of the bank regulatory mechanism is like a Swiss watch, where time is based on exact ratios of interrelated cogs, in this case the interrelationship between ratios of loan affordability based on sustainable cash flows representing production and productivity of borrowers and the ratios of how equity capital of banks (and lenders) is leveraged against the debt capital (cash from bank earnings and deposits), with the resulting financial contracts establishing sustainable market pricing and wealth accumulation and retention for whoever has the right to value assets on a hold to maturity basis, the Private Sector or the government and by extension the Federal Reserve.
3. This means that, unlike other theories based on proving models of data, by understanding and considering the mechanism of ratios that make up the economics of the bank regulatory mechanism, we can analyze and predict any socio-political-economic outcome simply by inputting into these formulas any changes to mortgage and loan affordability caused by changes in tax code, bureaucratic limitations of productivity, regulatory cost to mortgage and loan affordability, changes in borrower and bank equity to liability ratios, changes in mortgage and loan affordability due to cost of energy, cost of medical, cost of money (interest rates) and derive concise no-spin no subsidized slant micro and macro result.
It may be worth reading and absorbing the meaning and implications of these 3 last paragraphs before moving on to the discussion and exposition regarding the differences between mark to market accounting and hold to maturity accounting.
There are several aspects to consider in order to fully understand and appreciate the differences between mark to market accounting and hold to maturity accounting.