دانلود رایگان ترجمه مقاله بررسی نقش حسابداری ارزش منصفانه در بحران مالی (نشریه Aeaweb 20110)

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Did Fair-Value Accounting Contribute to the Financial Crisis?

In its pure form, fair-value accounting involves reporting assets and liabilities n its pure form, fair-value accounting involves reporting assets and liabilities on the balance sheet at fair value and recognizing changes in fair value as on the balance sheet at fair value and recognizing changes in fair value as gains and losses in the income statement. When market prices are used to gains and losses in the income statement. When market prices are used to determine fair value, fair-value accounting is also called mark-to-market account- determine fair value, fair-value accounting is also called mark-to-market accounting. Some critics argue that fair-value accounting exacerbated the severity of the ing. Some critics argue that fair-value accounting exacerbated the severity of the 2008 fi nancial crisis. The main allegations are that fair-value accounting contrib- 2008 fi nancial crisis. The main allegations are that fair-value accounting contributes to excessive leverage in boom periods and leads to excessive write-downs in utes to excessive leverage in boom periods and leads to excessive write-downs in busts. The write-downs due to falling market prices deplete bank capital and set busts. The write-downs due to falling market prices deplete bank capital and set off a downward spiral, as banks are forced to sell assets at “fi re sale” prices, which off a downward spiral, as banks are forced to sell assets at “fi re sale” prices, which in turn can lead to contagion as prices from asset fi re sales of one bank become in turn can lead to contagion as prices from asset fi re sales of one bank become relevant for other banks. These arguments are often taken at face value, but relevant for other banks. These arguments are often taken at face value, but evidence on problems created by fair-value accounting is rarely provided. evidence on problems created by fair-value accounting is rarely provided.

We discuss these arguments and examine descriptive and empirical evidence We discuss these arguments and examine descriptive and empirical evidence that sheds light on the role of fair-value accounting for U.S. banks in the crisis. that sheds light on the role of fair-value accounting for U.S. banks in the crisis. While large losses can clearly cause problems for banks and other fi nancial institu- While large losses can clearly cause problems for banks and other fi nancial institutions, the relevant question for our article is whether reporting these losses under tions, the relevant question for our article is whether reporting these losses under fair-value accounting created additional problems. Similarly, it is clear that deter- fair-value accounting created additional problems. Similarly, it is clear that determining fair values for illiquid assets in a crisis is very diffi cult, but did reporting fair mining fair values for illiquid assets in a crisis is very diffi cult, but did reporting fair values of illiquid assets make matters worse? Would the market have reacted dif- values of illiquid assets make matters worse? Would the market have reacted differently if banks had not reported their losses or used a different set of accounting rules, for instance, historical-cost accounting? If not, it is diffi cult to argue that rules, for instance, historical-cost accounting? If not, it is diffi cult to argue that fair-value accounting per se contributed to the crisis. Furthermore, downward fair-value accounting per se contributed to the crisis. Furthermore, downward spirals can arise for many reasons. It is easy to confuse problems that stem from spirals can arise for many reasons. It is easy to confuse problems that stem from the (voluntary) use of market prices in private arrangements—such as collateral the (voluntary) use of market prices in private arrangements—such as collateral or margin requirements or value-at-risk calculations—with problems that result or margin requirements or value-at-risk calculations—with problems that result from the (required) use of market values in accounting. Thus, it is important to from the (required) use of market values in accounting. Thus, it is important to be specifi c about the links through which write-downs under fair-value accounting be specifi c about the links through which write-downs under fair-value accounting can create problems, be it through bank capital regulation, contracts, a fi xation can create problems, be it through bank capital regulation, contracts, a fi xation on accounting numbers by managers or investors, or effects of ineffi cient markets. on accounting numbers by managers or investors, or effects of ineffi cient markets.1

We begin our analysis by explaining in more detail how pure mark-to-market We begin our analysis by explaining in more detail how pure mark-to-market accounting can cause problems in a crisis. We then outline extant accounting accounting can cause problems in a crisis. We then outline extant accounting rules for banks’ key assets. The majority of bank holding companies’ assets are not rules for banks’ key assets. The majority of bank holding companies’ assets are not carried at fair value on the balance sheet. When fair-value accounting applies, the carried at fair value on the balance sheet. When fair-value accounting applies, the actual rules differ markedly from pure mark-to-market accounting. Extant rules actual rules differ markedly from pure mark-to-market accounting. Extant rules allow banks to deviate from market prices under certain circumstances. More- allow banks to deviate from market prices under certain circumstances. Moreover, not all fair value changes enter the computation of banks’ regulatory capital over, not all fair value changes enter the computation of banks’ regulatory capital (regulatory capital is a bank’s equity capital as defi ned by bank regulation). These (regulatory capital is a bank’s equity capital as defi ned by bank regulation). These provisions should act as safeguards, making downward spirals and contagion less provisions should act as safeguards, making downward spirals and contagion less likely to occur as compared to a regime of pure mark-to-market accounting. likely to occur as compared to a regime of pure mark-to-market accounting.

After this background information on how fair-value accounting actually After this background information on how fair-value accounting actually works, we examine possible mechanisms through which fair-value accounting works, we examine possible mechanisms through which fair-value accounting could have contributed to the fi nancial crisis. Did fair-value accounting contribute could have contributed to the fi nancial crisis. Did fair-value accounting contribute to the problems of investment funds that invested in mortgage-backed securities to the problems of investment funds that invested in mortgage-backed securities and thus contribute to the demise of fi nancial institutions that issued those funds? and thus contribute to the demise of fi nancial institutions that issued those funds? Did fair-value accounting weaken bank holding companies or investment banks in Did fair-value accounting weaken bank holding companies or investment banks in other ways? Is there evidence that banks made use of the safeguards and discretion other ways? Is there evidence that banks made use of the safeguards and discretion built into fair-value accounting rules and that they deviated from potentially built into fair-value accounting rules and that they deviated from potentially distorted market prices or dealer quotes? Is there evidence that fair-value accounting distorted market prices or dealer quotes? Is there evidence that fair-value accounting led to excessive write-downs of assets? led to excessive write-downs of assets?