I'm not going to agree with Buffett on MtM in regards to regulatory capital. I also don't think we can paint everyone with the same brush.
What has confused the issue is the different types of capital requirements different organizations need. With the repeal of Glass Stegall we've really muddied the water.
Banks who rely on customer deposits of course might need immediate liquidation so yes they show run MTM. That's not the same with Insurace or General Business.
Then when we talk Security Firms we also could talk about an immediate need so MTM should be part of the program.
While I don't know all the perticulars of Tier I capital, I'm guessing it's a bunch of garbage considering the amount of money we've kicked in so far.
"In what way is Buffett’s recommendation on MtM accounting politically motivated?" I could not answer that precisely, but anyone as politically astute as you are knows Buffett's political leanings, which in any D/R matter are stricly "D". The credit crisis and bank bailout being two of hottest political crises of the day--and highly political--I would not be consulting Buffett's opinion on related matters.
"It strikes me as simple common sense." A dichotomy between "regulatory values" and "financial statement values" strikes me as a highly uncommon exercise without much grounding in reality. If it strikes you otherwise, so be it.
This problem will always come back to the non-existence of "market values" for non-marketable assets and liabilities. Inventing a phony "market value" does not give investors superior information. I cannot put the case much better than I did in #msg-35896422, other than to mention the following additional points:
1) In fact, true mark-to-market accounting will sometimes result in inflated values, rather than deflated values, a case which the mark-to-market enthusiasts never address in their zeal to give investors "better" information.
2) Investors have had market-value information for a good number of years now, as nearly as such values can be determined. Moving that information from the footnotes into the balance sheet, through the income statement, is not an improvement in the information supplied to investors.
3) Again, as to the information available to investors, impaired assets in banks are generally dealt with much more severely than in any other line of business, with total charge-offs being the rule for all seriously impaired assets and very substantial additions to reserve being made in all other cases. As long as banks are properly examined for soundness, "mark-to-market" will remain a frivolous playing about on the edge of impaired assets, and a mischievous source of bad information as to unimpaired assets.
4) The current growth in the use of the term "fair value" as an adjunct or substitute to "market value" should be a bright red flag. Whenever the word "fair" comes into play, we are talking politics, not financial reporting.
Sorry for this rather clipped answer, but my time has been and is still now somewhat limited for posting.
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