3/15/2008: Richard Kovacevich, Chairman of Wells Fargo, on mark-to-market accounting

Richard Kovacevich, Chairman of Wells Fargo says on Bloomberg’s “On the Record” (unfortunately no link to the video, which I recorded on my DVR):

If you mark to market the LDC debt back in the 80’s relative to the capital that was in the banks at that time, many banks would have been bankrupt. That is not the case today. They’re marking to market their problems, and the problems are in the same area of magnitude as the LDC debt and they still have substantial capital, much better than was the case back in the 80’s and 90’s. The difference is they weren’t forced to mark to market their problems. They are forced to today. And I would point out that it is likely because of the situation that exists when there is a bubble that the debt could well be being marked at a lower value than its underlying economics because they’re looking at a screen and no one wants to buy this at the moment and they’re forced to mark it down to whatever the screen says. And the screen is unlikely to be right.