commercial paper

Bailouts. Global interest rate cuts. More bailouts. Global government liquidity injections into banks. Direct government buying of commercial paper. And even more types of bailouts.

But nothing seems to stop the downward spiral of equity and credit markets throughout the world that have been accelerating this week. But there is one intervention the governments of the world haven’t tried yet: Standing up to the high priests of the accounting profession and suspending requirements of mark-to-market accounting for illiquid assets.

Markets are more connected across the world than ever before, but, more importantly, so are accounting rules. Over the past decade or so the U.S. Financial Accounting Standards Board (FASB) and the European International Accounting Standards Board (IASB) — private professional organizations that basically have a monopoly on setting the accounting rules that government agencies adopt for regulations on the private sector — have worked on a project of “convergence” of accounting standards. This wouldn’t be so bad if it just amounted to mutual recognition of each others’ rules. But it often has meant mandating a one-size-fits-all-rule throughout the world. And this has meant a disaster with the flawed mark-to-market rule.

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