Why FAS 157 Strikes Dread Into Bankers

Accounting rules organize how money is classified and valued – and investors expect transparency. New accounting standards, designed with that goal in mind, go into effect on November 15, 2007, and could exacerbate already volatile financial markets. By classifying a company's assets according to marketability, the new rules highlight those that are most risky, like sub-prime mortgages, and place the danger of bank failure in stark relief. The US standards apply to any global bank listed in the US. While the re-classification scheme may be good in the abstract, the timing could not be worse. The simple technical change, by coming in the midst of an economic crisis sparked by sub-prime mortgages, promises to have immediate consequences for banks, homebuyers and the stock market. – YaleGlobal