Publication Date

Spring 4-2012


School of Business



Primary Subject Area

Business Administration, Accounting; Business Administration, Banking; Economics, Finance


fair value, FAS 157, financial crisis, banking, accounting, mortgage-backed securities


Accounting | Economic History | Finance


The Great Recession has sparked a debate amongst accounting professionals and economic analysts. There has been a concerted effort to blame fair value accounting and FAS 157 as the recession’s root cause and an attempt to challenge FASB to return to the historic cost principle. This paper examines the guidelines and procedures for mark to market as established by FASB, observes the events leading up to the recession, conditions that materialized at the start of the recession, evaluates the role fair value played in the financial crisis, and considers how fair value should be used in the future.