Robert Rubin, the former U.S. Treasury secretary and Citigroup Inc. adviser, criticized fair-value accounting in a discussion, saying that the method had "done a great deal of damage."
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According to Bloomberg, Rubin made the comments at a discussion at the 92nd Street YMCA in Manhattan late Tuesday.
"I spent my whole life at Goldman Sachs believing in mark-to-market
accounting, and having said that, if you look at the experience from
the last two years, I think mark-to-market accounting has led to
terrible vicious cycles in asset prices."
Whether or not, fair-value (or mark-to-market) accounting, which forces
companies to value the assets on their books to reflect the current
market value, has made the credit crunch far worse is a hotly debated
topic. The Deal's Vipal Monga writes:
few subjects have received as much attention in recent
months as marking to market. If the past year is any guide, few topics
will receive as much focus in the months ahead.
Already, the fair-value accounting rule has been the subject of
countless editorials, columns and blogs, either loudly defending it as
the only thing keeping the U.S. from sliding into a Japan-style,
decade-long economic morass or decrying it for unnecessarily making a
bad financial crisis much worse.
The rule has become a flash point for fundamental questions about our
financial system. In fact, the debate around fair value has taken on
the air of an ideological struggle, touching on matters of fairness,
judgment, truth and the role of the markets in the economy.
-
George White
See Bloomberg story
See Dealweekly feature on the Fair Value accounting debate
