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The financial crisis is turning many things upside down. Nevertheless, it is amazing to see how the positions of key market actors on financial reporting standards have changed since the crisis started. While investment banks, accounting firms, regulators and governments in the heyday of financial market capitalism stood firmly together in unanimous and unfettered support of fair value accounting, this front has been collapsing.

In April 2008, Neue Züricher Zeitung reported Claude Bébéar, president of the French Insurance Group Axa, as saying that mark-to-market rules which require firms to value assets according to (hypothetical) market prices had contributed to the financial crisis. Henri de Castries, CEO of the same group, was quoted as referring to a “conceptual mistake” which had forced companies and banks to write down billions of assets. In September 2008, Newt Gingrich commented on Forbes.com “Suspend Mark-to-Market Now!”, quoting Brian S. Webury, chief economist at First Trust Portfolios of Chicago:

“It is true that the root of this crisis is bad mortgage loan, but probably 70% of the real crisis that we face today is caused by mark-to-market accounting in an illiquid market.”

With the financial crisis lingering on and politicians, regulators and banks still searching for solutions, debates on the pros and cons of mark-to-market accounting have perked up again during the last weeks.

On March 11, 2009, investor Warren Buffet admitted in an CBNC interview that mark-to-market had been “gasoline on the fire” while remarkably equivocally maintaining that Read the rest of this entry »

The Book

Governance across borders: transnational fields and transversal themes. Leonhard Dobusch, Philip Mader and Sigrid Quack (eds.), 2013, epubli publishers.
March 2009
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