Features
Don’t Shoot the Messenger:
The Unfair Attack on
Fair Value Accounting
by Neil A. O’Hara
The debate over mark to market has grown increasingly heated, nudging fair-value accounting principles out into the spotlight of public scrutiny—or toward the fierce light that beats upon the scaffold. The clash of priorities culiminated (but didn’t terminate) in early April, when the Financial Accounting Standards Board bowed to Congressional presure and implemented rule changes for banks’ valuation of securities. Neil O’Hara suggests that those fighting for valuations based on historical cost are either blind to the centrality of regulatory capital calculations in the current crisis, or are engaged in a desperate bid to deflect blame onto a bevy of bewildered auditors.
Bonus material! An alternate take on fair-market valuation warns of the perpetual threat of illiquid markets. From Tom Arnold, John Earl, and Michael Weiss of the University of Richmond.

Hive Mind:
Organizational Psychology and the Origins of the Financial Crisis by Marlene Givant Star
When we study the current financial catastrophe, we tend to examine misapplication of models, exploitative lending practices, indefensible ratings systems, securitization that obscured the low quality of assets in the pools, shabby regulation from above and within, and the assumption of lunatic levels of risk. But we must also ask how we allowed ourselves to trust these models, issue loans to borrowers with abysmal credit, implicitly believe the ratings agencies, and assume—even embrace—the risk. TIP investigates the psychology of bankers, analysts, and brokers—and of the corporations themselves. Our psychoanalysis of the companies and individuals that participated in the run-up to the meltdown reveals the emotional triggers that pushed us to inflate the credit bubble past bursting point, and shows how corporate policies deactivated the fear and shame reactions that should protect us from ourselves.