Subject: File No. 4-573
From: David Risgaard, CFA
Affiliation: North Star Asset Management

December 8, 2008

Dear. Chairman Cox,

Your comments regarding mark to market accounting rules “…the Associated Press reported SEC Chairman Christopher Cox said accounting rules must be neutral and shouldn't be changed inappropriately in reaction to a financial crisis.” miss the point that the mark to market rules were recently implemented shortly before the crisis started and have been a key element sustaining the credit crisis. This clearly shows that you have no idea how the markets work. Mark to market accounting makes perfect sense from an accounting standpoint. I won’t disagree with that. However, when implemented they have frozen the credit markets due to the fear of having to mark down the value of credit instruments even when the ability to pay has not been harmed in any way. Buyers of non-government credit have dried up because of the fear of market driven markdowns. Those that are buying are requiring a substantially higher rate of return, which is having a significant negative feedback loop on the economy, bond prices, and stock prices. If it isn’t changed, the mark to market accounting rule will significantly increase the cost of capital for businesses by shutting down the corporate bond market as a cheap source of capital. More companies will be forced to use the banking system, equity capital, or internally generated capital which will increase the cost of capital and reduce the growth potential of our economy. All because you are worried about changing an accounting rule in reaction to a financial crisis!!!


David Risgaard, CFA
North Star Asset Management