The term “Mark to Market” definition according to wikipedia is “an accounting methodology of assigning a value to a position held in a financial instrument based on the current market price for the instrument or similar instruments”. This basically means when I have a contract such as a futures contract, when I go to report this contract for accounting purposes I can mark the value of this contract the value that it is the day that I fill it out and not the value that it will be the day it expires.

Now you may ask what does this have to do with the Economy as a whole or my wallet. This means that a company can be over valued because they are marking their contracts at a value higher than what they are really worth. This type of accounting started in the derivatives and futures exchanges but slowly made it’s way to Banks and Corporations. These corporations were able to create their own financial models to give hypothetical situations where these trades would be worth the amount that they posted. Now this hypothetical situation would become the actual value of the stock. A lot of this type of accounting was used by banks for the sub prime markets (sidenote: It was required by th SEC) which led to false valuations to spread like wildfire.

This is only a summary of Mark to Market accounting. If you would like a more detailed or quicker explanation you can go to Motley Fool or investopedia. It is good to know these sort of things when you are watching business news so that you can follow the conversation and know how that conversation is affecting your wallet.

If you want a good example of that case just look at who Friedman is holding up as the savior of the car industry, Steve Jobs. Steve Jobs is a one of kind leader that sparks imagination and wonder out of his employees, he did at Apple, later at Pixar, and then again at Apple. Now look at his major competition, the behemoth known as Microsoft. Microsoft is not known as being an innovative company. Their mantra has always been taking an existing product and make it better and more user friendly. Although I think they have several innovations that they do not receive credit for, this is what they are good at. They have a much larger R&D budget but yet Apple still beats them to the punch every time with a shiny new product that becomes the new cool thing to have. Apple’s hallmark is innovation and that comes from your business culture and not spending. This is the reason why Steve Jobs would do horribly in the automotive industry.

Computers and the entertainment industries allowed Steve to go wild with his imagination and go from paper to product in a fairly short amount of time, no matter how far out there the idea was. The car industry is a totally different kind of animal. Innovation takes decades within the automobile industry. There is serious government regulation to deal with, not to mention environmental concerns as well as physics and a host of other obstacles.  Just like Michael Jordan’s failures when it came to baseball Steve would be in an industry that he is not comfortable with and doesn’t allow him to best make use of his abilities. What Detroit really needs is the Steve Job’s of automobiles not Steve Jobs himself. We need superstars like in the days of Lee Iacocca who had his problems as well but helped bring Detroit to some of their best years.

This problem is not going to go away and what we need in the future is to make sure that we can find the next Steve Job’s no matter where he might be. Malcolm Gladwell argues that opportunity cost as well as talent goes into whether someone becomes successful or not. He cites as an example Bill Gates living next to Washington University so he could get thousands of hours of practice time on the computer where during that era others couldn’t. We have to make sure that opportunity cost are well lowered for this next generation coming up. We need to make sure that from the tenements of Harlem to the corn fields of Iowa that we are able to find the next Steve Job’s no matter what the industry is and allow them to have the educational tools needed to succeed.

There is a good amount of people that believe that the bail out was ill conceived as well as not an ideal solution. I agree with both of those premises but I also believe that it was the right thing to do for the short term, only implemented in the most bone headed way possible. We have to worry about jobs and not just punishing mishandled corporations. If we allow GM alone to go under they are predicting as much as 3 million jobs could be loss, from the corporation and it’s subsidiaries, to the hot dog vendor on the corner. That would be a disastrous hit on our economy and something that can not be allowed to happen.

This bail out could have gone so much better but so far has proven to be another wayward episode in the life of the Bush administration. We had a model that has already proven to be a  successful way to ease us into the bail out. All we had to do was look at Britain and their bailing out of Northern Rock and other financial institutions. They have one thing that was implemented that our federal governors failed to do, and that’s hold these banks accountable. The government is now members of the boards of the financial institutions that they helped bail out. The most important business and mandate of these institutions is to pay back the tax payers, then the investors, and then the CEO’s of the companies. In America we have companies that have been bailed out billions of dollars still throwing lavish parties for the only reason, “that they were planned beforehand”. This is ridiculous, our bail out money is buying us no leverage against these institutions. We should be partial owners and controllers of these financial and automotive giants and if they don’t like it then we will allow you to fail, it’s the American way. These companies need a serious spanking and Henry Paulson is not giving it to them. Maybe he is to much of a buddy to the financial industry and doesn’t want to risk not being invited to anymore social gatherings. Whatever the case this buddy system that we have been doing with the bail out has to end and has to end now. With our money comes accountability and if you don’t like that, good luck with digging your company out a ditch.