Replies to post #71954 on WEALTH UNIVERSITY

[dam]

I think it's not about suspending M2M across the board, but specifically on derivatives which have become illiquid. For example if a derivative suddenly becomes a black box, then suddenly very few people want the added risk, even though they may still in specific cases still be holding pretty decent value. Say another person holding the same security is being pounded hard and has to deleverage-or-else, so they liquidate their holdings in a panic for cents on the dollar. Now everyone else in this market has to mark down their assets if those fire sale prices are the only prices others will pay.. regardless if a bank just wants to hold the derivatives and regardless of the value the derivative may be worth.

At least, thats my understanding of the debacle.