No surprise, bankers are almost uniformly opposed to a proposal to expand the use of fair-value accounting. But the plan was never meant to appeal to bankers.

It was on investors' behalf that the Financial Accounting Standards Board (FASB) floated a rule that would make banks mark to market nearly all assets and liabilities.

Certainly there are investors who like the idea. The only way to know whether banks threaten the financial system "is to reinstate mark-to-market and force them to deal with these underwater assets that they are being allowed to price at whatever they choose to make their books look good," Jerome Ruffin, a self-described "consumer and investor" from Fayetteville, N.C., wrote in a comment letter.

But for every Jerome Ruffin, there has been at least one comment letter from an investor, or a firm representing billions of dollars in investor assets, taking the opposing view.

The central provisions of the proposal "could make our analysis more difficult as the accounting would be less reflective of the underlying business," argued the three authors of the comment letter submitted by the asset manager T. Rowe Price, which oversees $391 billion of investments for individuals and institutions, with $40 billion allocated to the financial services sector.

If the comment letters on the proposal comprise too small and self-selecting a sample to draw conclusions about how investors really feel about fair value — of the 260 comment letters filed to date, most have been from bankers and financial advisers — it may not be too early to at least question the FASB's claim that "most" users of financial statements believe fair value to be more relevant than other measurements "in helping to assess the effect of current economics events" on a company.

"It's become very clear that the FASB's claims of broad-based support are simply not there," said Joe Longino, a principal with Sandler O'Neill & Partners LP and the author of a comment letter opposing the board's proposal. "I think this proposal may be a bridge too far."

Gaynell Lawson of Maryville, Tenn., has held stock in a community bank for 37 years, and wrote to the FASB about the potential impact of the proposed rule change. "The bank's ability to make loans, its primary source of profitability, would be seriously hampered by the need to make market objectives instead of risk management and customer service," Lawson wrote. "Please consider the needs of investors in community banks, and do not require mark-to-market for the entire balance sheet."

Of course it's difficult to assess the overall sentiments of investors, which is as broad a classification as any given the wide range of investment goals and strategies. The letters filed with the FASB, which is inviting public comment through Sept. 30 and posting the letters on www.fasb.org, provide nothing more than anecdotal evidence.

But there have been a handful of other attempts to discern investors' preferences, and though they may not be any more scientific, they generally do not seem to back up the FASB's position.

Earlier this year, PricewaterhouseCoopers conducted hourlong interviews with 62 users of financial statements and found that a majority preferred a more nuanced system, where the accounting treatment of an asset would depend on the characteristics of the asset itself or of the company holding it. On June 18, Barclays Capital got a telling response to a questionnaire it sent to recipients of the firm's daily report on the banking sector.

"We received 102 responses from institutional investors, with 92, or 90%, responding 'no,' they do not agree with the proposal," Barclays Capital banking analyst Jason Goldberg wrote in his comment letter to the FASB. "If the most sophisticated long-term bank stock investors do not want this, we would be surprised to see FASB continue down this path."

Recent changes at the rulemaking board have clouded the odds-making practice even for experienced watchers of the FASB. The board has issued no guidance for interpreting the implications of FASB Chairman Robert Herz's pending retirement. He was one of the three proponents of expanding the use of fair value, and the board member taking over his duties on at least an interim basis, Leslie Seidman, has expressed a preference for using amortized cost-based accounting, instead of fair value, for instruments such as loans that banks intend to hold to maturity.

The FASB also intends to increase the size of its board from five people to seven. It is unclear what effect any of these developments would have on the deliberations over the proposal, which start back up after the comment period ends, or on the vote itself.

Brian Kaufman, a managing director at SecureVest Financial Group, remembers at least one occasion when the FASB reversed course, essentially tabling a proposal in 2004 that would have changed the accounting treatment for certain kinds of investments. He said he hopes the proposal to expand fair value follows a similar route, arguing that the upheaval would be overwhelming, particularly in the community banking sector.

"People are drawn to community banks for stability of earnings growth. If all of the sudden you add in significantly greater volatility, it changes the nature of bank investments," Kaufman said.

But if the FASB were to backtrack now, would investors be happy with the status quo?

In the Pricewaterhouse survey, only 13% of respondents said financial statements are "sufficiently useful" in their current form. They wanted to know more about portfolio components and the methods used to value them.

Ruffin, the comment-letter writer from North Carolina, pleaded with rulemakers to improve the clarity of financial statements.

"I hope and pray that the FASB does not succumb to the lobbying pressures as Congress has time and time again," he wrote.

There was no such sentiment to be found in the comment letter from JPMorgan Chase & Co., which takes issue with the FASB proposal as both a preparer of financial statements and a user of them. But even the bank acknowledged the shortcomings of the current system.

"If the limitations of the current impairment model were addressed," the bank wrote in its comment letter to the FASB, " … we believe that some of the focus on fair value would dissipate."

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