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Anthracite Capital, Inc. Message Board

  • Rusty_Wallace_Fans Rusty_Wallace_Fans Sep 30, 2008 5:21 PM Flag

    Will mark to market change proposal help AHR

    I am hearing on CNBC that they may proopose some alternative or interpretion of Mark to Market acconting when there is not a solid market. They call it mark to model. Would this help AHR or do you think the lenders would still require MTM accounting. I thought AHR might be up today as NCT was up nice for a change.

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    • Mark to model is already allowed in the absence of an public auction market. Which explains the creation of Markit, the service that publishes the CMBX numbers used by virtually everyone to value the assets.

      Recasting the M2M rules will be incredibly positive to any entity that has to maintain GAAP values on the assets they borrow against. The margin calls AHR and all the other mREITs faced are triggered by a drop in market value of the pledged assets they borrowed against. If the regs are rewritten then the lenders will need to structure a new method of periodically making sure that the collateral is adequate.

      The 700B will not directly have much impact on AHR but slacking FASB 157 would be golden.


    • It would seem like it would depend. They have marked down both their assets and their liab.

      I doubt they would be allowed to move the assets back to book, or some high percentage of that and leave their liab mark to market.

      So they might find that some of the upward movement in the assets in the revalue, would be offset by and upward movement in their liab.

      And at this point would the market care? At some point if you change the rules during the crisis looks like you are fixing the game.

      • 1 Reply to kahe_us
      • They are fixing the game, but they are also the bozo's who changed the rules in the first place. This shuld help greatly because, in fact, AHR is a buy and hold investor. That is the premise of their match funding which got screwed up when the SEC went to mark to an empty market accounting which forced them, prior to this year, to mark down only only thier assets and not the market value of their liabilites. Now they can fully justify their book value which is north of 10.00 per share.

        Also, it relieves pressure on the banks and insurance companies to get rid of thier CDO's and in fact, permits them to mark them up.

        Because of this change the "Paulson Plan" will be scaled back and the second cut at funding will probably not be needed. The Banks can mark to model and they don't need actual sales in order to show a strong balance sheet. It also, ironically, means that the Paulson Plan may actually not show as much profit because the Banks will now only sell those assets that their models show are worth less than the Treasury bid. This will then quickly be added to the models and they will again revise the marks upward.

        I don't know why we didn't scream higher today but we did get back to even. Hopefully, once they have told their good customers and let them get in, the analysts will begin to upgrade. Models are based aon cash flows and defalut rate estimates, AHR is good at both.