Subject: File No. 4-573
From: Philip Varley, CPA
Affiliation: President, The Barrington Group Inc

October 30, 2008

Mark to market accounting for financial instruments to be held to maturity by a financial institution is fundamentally flawed, as such instruments are the equivalent to the bank as are fixed assets to a manufacturing company.

When I, as president of a manufacturing company, buy a machine tool for $1 million, and assume it has a useful life of 20 years, I will charge $50,000 per year to my P+L for depreciation. However, at the end of year 1, if I want to sell the machine, I will be very lucky if this "used" machine tool could be sold for more than $400k. If I were to mark to market this machine tool, I would have suffered a loss of $600k. Yet because I intend to continue using it for another 19 years, I can still value it at $950k.

The same should be true for financial institutions. The only asset write downs which should be allowed are on assets which are no longer performing. If a mortgage is being repaid in a timely manner, it should not matter to the company, or the readers of financial statements, whether or not there is a market for that mortgage. Likewise, if a stock is held for the long term, until it is sold, it is not a realized loss. Provision for a notional "unrealized loss" because the market is temporarily down should not be recorded.

I am of the opinion that mark to market accounting is partially responsible for this worldwide credit crisis, as one write down by one bank leads to a spiral of write downs by others which invested in the original one.