Fair Value Accounting Losing Favor

Bravo to the FDIC, who last week came out with a strong critique of FASB’s proposed Fair Accounting Rules.  This time, Sheila Bair has it right.

As applied to banks and other lending institutions, the FDIC is quite right to point out that forcing banks to take ongoing market-driven snapshots of the value of their holdings is contrary to the business model for these organizations and gives investors in these companies an irrelevant set of data points for relative value of the institution itself.

We agree completely with those that believe the proper approach to measure and value these organizations is the continued utilization of an amortized cost accounting regimen.

Hopefully, the weight of the argument against Fair Value Accounting continues to build.

Now if we can only get the FDIC to look inward at policies for Safe Harbor and Skin-in-the-Game, we’ll really be making progress towards reviving broad-based interest and trust in securitization.

About markferraris
Managing Principal Orchard Street Partners LLC

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