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How Far Can Fair Value Go?

Publication Date: 
May 06, 2008
Sarah Johnson

Professor Joseph Grundfest is quoted in a story about how current Financial Accounting Standards (FAS) might be revised:

The volatility issues at the banks raise the question of whether FAS 157 should be revised, suggested CIFR member Joseph Grundfest, a professor at Stanford Law School, during a meeting last week. "Not only do we have problems with phantom capital in situations where mark-to-market allowed you to create capital that never really existed, we can also by the same logic have phantom losses, where mark to market creates situations where you have to go out and raise physical capital in order to cover losses that as a practical matter were never really there."