The Wall Street Journal today carried an opinion piece from Arthur Levitt, the prior head of the SEC, giving a robust defense of the need for mark to market accounting. Among Levitt's comments:
"The events of the past two weeks constitute the next chapter in a fundamental crisis in financial reporting that has plagued our markets for the past decade. There is a direct line from the implosion of Enron to the fall of Lehman Brothers -- and that's an inability for investors to get sound financial information necessary for making sound investment decisions.
To ask for a suspension in fair-value accounting is to ask the market to suspend its judgment. These trade groups claim that the fair-value accounting standard has distorted banks' balance sheets, and has contributed significantly to the market's volatility.
We should be pointing fingers at those at Lehman Brothers, AIG, Fannie Mae, Freddie Mac and other institutions who made poor investment and strategic decisions and took on dangerous risks. Blame should not be paced on the process by which the market learned about them.