Banks Claim It's Killing the Economy - Here's "It" is, and How You Can Understand "It".

Decoding the business pages sometimes involves a two step process. Step one: Getting past industry lingo. Step two: Understanding often obtuse business concepts. We try to help you decode the business pages and put you ahead of the curve. Today, Allan Sloan, senior editor at large for FORTUNE Magazine has done the two steps for everyone in his FORTUNE article posted on CNN/Money.com. It is about industry lingo called "mark-to-market" - aka - Financial Accounting Standard 157 (sometimes called FAS 157). Sounds terrible, huh? Well, it might have a big impact on your 401k.

Here's why you care: Mr. Sloan frankly does a service for you by explaining this term because all the banks REALLY, REALLY, REALLY care about it. In fact, why they care is why you care. The concept basically requires banks to account for all their assets at the price they can sell them today. Banks say, hey, wait a second, I wasn't intending to sell those bundled mortgages for years so don't make me say they are only worth what I'd get for them on today's market that is in the gutter, because if you do that I'll need even more money to stay afloat.

And if banks need more money, and can't get it from other banks, guess where they turn? Under the Emergency Economic Stabilization Act they can go to the U.S. Treasury. This is about to get a lot of attention because the Stabilization Act says the concept has to be studied - thus the reason for the banks' concern, they don't want to have to readjust their balance sheets in a negative way. You can bet Wall Street is watching. You need to as well.

There is, of course, a counter argument which essentially says the concept works because what if a bank suddenly ends up having to sell the asset? Shouldn't we have a fair read of the value of all the assets? And of course, now that taxpayers have stock in many of the banks that makes things even more interesting.

Read Mr. Sloan's article and never let "mark-to-market" send you to Wikipedia again.