Fair value assumes the exchange of assets or

liabilities in orderly transactions. Under SFAS

157, it is appropriate for you to consider actual

market prices, or observable inputs, even when

the market is less liquid than historical market

Current market conditions may require you to use

valuation models that require significant

We've read and re-read and re-read again this letter.

We've considered it; re-considered it, and re-considered.

We've asked friends in the business for their take, and

after two days we've come to the conclusion that

mark-to-market has quietly died with this letter, and with it

transparency in financial accounting.

What the SEC has decided is that the only method to cure

the ills that face the nation's banks, broking firms, hedge

funds, real estate financing groups et al is time... time and

the ability to take a breath; to stop the mandatory

marking-down of assets held by one organisation as

another is forced into liquidation holding those same

assets. The SEC is stating for the record that the

immediate marking-down of assets will end with an

eventual marking-back-up of those same assets

sometime into the future, and rather than create

accounting mayhem now, let us hope that time does heal

all wounds. The SEC, it seems to us, is remembering

how it was that Citigroup was effectively insolvent back in

the early 90's just before Sheikh Walid bin Talal bought

his huge stake in the bank, and that had mark-to-market

accounting been the order of the day then, the bank

would have been insolvent. But time passed; the banks

loans proved of some longer term merit; time restored the

balance sheet to health and the problems of the day

proved ephemeral.

The SEC is taking another pragmatic view of things,

noting that the times are precarious; that a large number

of those who report to it are in rather dire straits and that

"time" needs to be bought for them rather than further

pressure be brought upon them. There will be many who

will argue that this is a horrid decision; that

mark-to-market has proven to be the best of all worlds

regarding transparency; that the man behind the curtain

really isn't "The Great and Powerful Oz" we thought him

to be, and that the harsh reality of daylight needed to be,

is not and should in the future be shined upon these

investments. Normally, we would be amongst that crowd

yelling our assent quite vehemently. But just as in the

Fed's recent decision to accept any and all collateral for

borrowing at the various "windows" it has opened,

pragmatism trumps all else in this instance. The SEC is

quietly saying that there may be a time in the future when

strict adherence to SFAS 157 shall again be meet and

right, that time is not the present time.

Now the question becomes, who is the beneficiary and

what will the capital markets think of all of this. Our first

inclination is to believe that the nation's banks just got a

holiday from fear. Our second inclination is to believe the

same. Our third inclination is to believe that others will

say that this is "smoke and mirrors" and that the banks

are doomed because confusion shall reign. We are open

to suggestions.... obviously!