The tribe needs meat. The antelope, gazelle and wildebeest have already passed through your area on their annual migration so the easier game is gone. Off in the distance you and your buddies see a lone bull elephant, whose meat would feed the tribe abundantly well. The problem is that all you have for weapons are some sharpened sticks, some rocks, and some rock flakes tied to sticks. Big problem, and a big payoff if you can solve it.

Mark to market accounting is like that.

At a recent Future of Finance Initiative seminar sponsored by the WSJ, Stephen Schwarzman, head of the investment firm Blackstone Group, said “If [a bank] made a loan in the old world . . And you didn’t think it was impaired, you kept it on your books at par. Now, if loans are trading at $70 [per $100 and] you make that loan, you lose $30 just for making the loan.”

He concluded, “Even though there is a lot to be said for complete mark-to-market in a system that can take it, I don’t believe that the financial system, as currently organized with its current rules, can really take the full hit of it.”

Robert Shiller, professor of Economics at Yale U., countered with “The first thing is to make sure that we preserve the integrity of our accounting. People know that this country stands for high integrity, and so anything that looks like we’re allowing people to doctor the books, I think we shouldn’t do that.”