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Posts Tagged ‘model’

New York stock market index

When I applied for a pre-approved mortgage at the height of the financial crisis in early 2009, the bank asked for the current market value of my assets.

At the same time, many U.S. banks were marking their assets to model, meaning they could decide what to value them at based on a model they created.

While the very banks that marked their assets up based on pre-crash levels  to sell mortgages to customers on the basis of having the collateral, they expected something different from their customers. Namely, the current market value of their assets, which were mostly highly depreciated relative to a year prior.

The world’s richest man as of the end of 2010, Warren Buffett, before he turned his back on his principles, wrote in 2002:

In extreme cases, mark-to-model degenerates into what I would call mark-to-myth.

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