Good point about liquidation, the heart of the issue.

The new Mark to Market regulation will help banks, by allowing they to valuate asset and not write down mortgage assets at liquidation pricing due to short term valuations in market fluctuations. However, if the asset devalues long term, the new Mark to Market regulations will not help banks, eventually, the bank will have to realize the loss.

Suppose, you have two people bind for a house and the last bid between two people is 100k. However, the final cost to the buyer paid for the home was 205k.

Simplistically, in this scenario, the Market to Market valuation would be 100k. Wait. Didn't the buyer pay 205k? Shouldn't the true market valuation be 205k? However, the liquidation pricing would be 100k. As prices are dropping Mark to Market contracts asset valuations. As prices boom Mark to Market inflates prices and earning (Remember Enron and their creative accounting)

Mark to Market, historically forced banks to write down their assets and required banks to seek loans to cover the losses. Banks became loaded down with debt. Debt has a premium, a premium that weakened the banks. BoA and Citigroup are buying MBS, at discount; the see the opportunity to buy low and sell high, but more importantly to leverage the cash flow.

Will Real Estate prices continue to depreciate? Once prices hit bottom will the real estate price remain flat?

As the government buys bonds, it will lower yield. Fix rate loans rates drop and the housing market is subsidized short term.

However, the question still remains, will banks make enough money before interest rates rise, taxes increase, and inflation increases? Have banks run out of steam?

Investor seem to be concerned about corporate bond prices and the deviate between US treasury yields and Bond yields. If corporations are not capable of paying down debt than why would real estate growth boom, jobs increase, and GDP spike upward?