Monday, January 5, 2009

So Who Should We Believe?

The Securities and Exchange Commission (SEC) just released its voluminous report totaling more than 200 pages that investigated whether fair value accounting was to blame for any or all of the credit crisis and financial dislocations over the past year. The SEC concluded that fair value accounting "did not appear to play a meaningful role" in the 25 bank failures that have occurred this year or the tumult at collapsed investment banks."

The next day a group of insurers say just the opposite in its report.

"The application of fair value accounting measurements to an inactive, illiquid, and disorderly market for structured credit products helped fuel the worldwide credit crisis, an organization of major insurers and reinsurers told the U.S. Financial Accounting Standards Board (FASB)....that while the organization does not believe that fair value measurements caused the global credit crisis, "unreliable, and non-transparent fair value measurements served as a powerful accelerant."

2 comments:

Eric Rasbold said...

Good Lord, the SEC needs to maintain a "hands-off" approach to the open market. With the exception of punishing outright fraud, they should never regulate the function of true price discovery. Such a thing devalues the purpose of the market and all of its benefits. All investors know there are risks, no one has been sheltered from loss; not even Warren. Let the money speak, nothing else.

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