Mark to Market Accounting

One of the puzzles of this financial crisis is the rapid spread of problems from subprime mortgages to prime mortgages to commercial mortgages to credit markets to investment banks to insurance companies.  The underlying fundamentals were rather bad, but do they really justify a wholescale collapse of the entire financial sector?

Here is a dissenting opinion from the WSJ opinion pages citing the research of a Yale professor on marking assets to market.  The idea is that while gaining accurate market information on the value of assets is worthwhile, there are certain cases (such as when firms intend to carry securities to maturation) where it's not a helpful calculation, and can in fact increase speculative downward pressure.  I'm not too sure what to think of this idea, but it's interesting.  Certainly I'm taking a close look at financial companies which have been beaten up due to holding assets that the market does not value, but do not have any short term liquidity constraints.