Fair value triggers panic among Wall Street banks

Fair value accounting is set to trigger a series of write-downs of up to
£190bn on Wall Street this week.

US accounting standard FAS 157 is set to prohibit banks such as Citigroup,
Goldman Sachs, Morgan Stanley and others from setting values to sub-prime
mortgages and other forms of debt on the basis of ‘assumptions’, the Daily

Assets must instead be valued at market prices.

Barclays share price dropped 9% at one
point in the run-up to Friday’s trading, causing trading to be suspended. The
bank denied reports that it was preparing to write $10bn in sub-prime

Royal Bank of Scotland credit chief Bob Janjuah said the standard could lead
to a further $100bn for write-downs as banks are forced to come clean, with
total losses climbing as high as $500bn across all forms of distressed credit.

Further reading:

in the frying pan

Understanding fair value could take 30

FAS 157 strikes dread into bankers

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Fiona Westwood of Smith and Williamson.