Black Swan: Eliminating 'Mark To Market' Like Putting Head In The Sand - Economy * US * News * Story

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CNBC ON DIGG

Black Swan: Don't Change 'Mark To Market' Rules

By: Natalie Erlich, Writer/Producer | 31 Mar 2009 | 10:41 AM ET

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Altering mark-to-market accounting rules would bring more opacity to the financial system, said Nassim Taleb, “The Black Swan” author.

“It’s exactly like how a thermometer makes a patient look more sick,” he said in a CNBC interview. “Eliminating the mark-to-market is exactly like putting your head in the sand.”

Rather than taxpayers propping up large banks, Taleb said, the hedge fund model should be followed.

“Some go bust, some do okay, some have problems,” he said. “We don’t care. It’s their problem. It’s not society’s problem.”

Fixing the financial crisis requires a financial system with less debt and less complex derivatives, he said. The solution is not to alter the current financial structure, said Taleb, but rather, to look for “robustness” in the system.

“Complexity causes fragility,” he said. “You’re no longer riding a horse—you’re flying a Concorde. A horse doesn’t explode but a Concorde can have a problem. We now have a Concorde in our hands.”

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