Mark-to-market accounting (fair value)

The new 'big' thing that someone (Newt Gingrich?) is pushing to solve the economic crisis is to suspend 'mark-to-market accounting'.

Mark-to-Market accounting is also known as Fair Value accounting.
A corporation is required to enter the fair market value of their assets on the books.

Some want that rule suspended.

Newt Gingrich commentary on Forbes magazine.
http://www.forbes.com/home/2008/09/29/mark-to-market-oped-cx_ng_0929gingrich.html

From that commentary:
"Chief economist Brian S. Wesbury and his colleague Bob Stein at First Trust Portfolios of Chicago estimate the impact of the "mark-to-market" accounting rule on the current crisis as follows:
"It is true that the root of this crisis is bad mortgage loans, but probably 70% of the real crisis that we face today is caused by mark-to-market accounting in an illiquid market. What's most fascinating is that the Treasury is selling its plan as a way to put a bottom in mortgage pool prices, tipping its hat to the problem of mark-to-market accounting without acknowledging it. It is a real shame that there is so little discussion of this reality." (Emphasis added.)
If regulators on their own--or Congress, if regulators fail to use their discretion--can fix 70% of the financial crisis by changing the mark-to-market accounting rule, we should change the rule first before attempting to pass another reevaluated bailout package. "

I just saw the First Trust guy on CNBC with Erin Burnett and his take is that if the assets were valued at what the holder wanted it to be valued at, most of the problem would be taken care of. There wouldn't be a loss of value.
He said the key is that the holder of the asset doesn't HAVE to sell it so it can be valued at whatever they want it to be.

Erin was arguing the other side - that the people who hold the assets have been valuing their assets incorrectly the whole time and that's why we're in this mess, so why should we believe they can accurately value their assets now.

My opinion is that this would be a HUGE mistake. All you're doing is, once again, passing on the problem until later. We can't keep playing games with reality so things LOOK better than they are. If the mark-to-market valuation is GAAP (the accepted practice) and has been for awhile, then it should stay that way.

Your assets should be valued at what price you can get for them at any moment.
Yes, the value of homes went down - way down.
But, if you (investment bank or institution) had not made the strange assumption that home prices only go up and if you'd been less free-wheeling and if you'd had a more conservative amount of money in your reserve, you would have had enough capital to withstand the economic downturn of the market.

In any event - mark-to-market should NOT be suspended and once again I disagree with Newt Gingrich.

The reality of the Free Market system is that you will pay or sell by what the market will bear. If you can't sell your home today for the price you want to, then that's not the free market value and you're just fudging.
You can't be a free market conservative and fudge the numbers at the same time.
Some of the comments attached to the article are helpful in understanding the two sides. I come down on the side of value = free market value.