This paper is concerned with the allegation that fair value accounting rules have contributed significantly to the recent financial crisis. It focuses on one particular channel for that contribution: the impact of fair value on actual or potential failure of banks. The paper compares four...

We discuss “Economic Consequences of Mandatory Auditor Reporting to Bank Regulators” by Balakrishnan, De George, Ertan, and Scobie (BDES, Journal of Accounting and Economics, forthcoming). BDES concludes that a key benefit of mandatory auditor reporting to bank regulators is reduced bank...