Mark-to-market (Fair Value) accounting exacerbates the downward cycle of falling prices: “[O]ur practice of so-called fair value accounting is sheer lunacy. The problem is that when a run on a risky asset occurs, driving its value down, accountants then value the firm that holds that asset's financial position at the latest market price. As the value of risky assets plunges, firms are forced to sell into the declining market to raise cash. Those sales drive the prices down further, necessitating even more sales.”
(Hassett, Kevin, “Magic Ring to Save Us May Be Accounting Overhaul,” Bloomberg, September 29, 2008)

Mark to market accounting may lead to insolvency: "Unfortunately, there is no working market to mark this paper down to. To meet their bond covenants and their capital requirements, these firms have to sell their paper at distress prices that don't reflect the upbeat fact that the anticipated income streams from this paper might well keep the firm afloat."
(Epstein, Richard. “Greed, or Incentives?” Forbes, September 23, 2008)

Former head of the Federal Deposit Insurance Corporation (FDIC) William Isaac suggests mark-to-market accounting would have had devastating effects during the 1980s credit crisis: “Assets should not be marked to unrealistic fire sale prices. Regulators must evaluate the assets on the basis of their true economic value (a discounted cash flow analysis). If we had followed today's approach during the 1980s, we would have nationalized all of the major banks in the country, and thousands of additional banks and thrifts would have failed. I have little doubt that the country would have gone from a serious recession into a depression.”
(Isaac, William, “How to Save the Financial System,” Wall Street Journal, September 19, 2008)

Economists Brian S. Wesbury, Chief Economist and Robert Stein, Senior Economist at First Trust Portfolios of Chicago blame mark-to-market accounting for current crisis: “It is true that the root of this crisis is bad mortgage loans, but probably 70% of the real crisis that we face today is caused by mark-to-market accounting in an illiquid market.”
(Wesbury, Brian and Robert Stein, “Mark-to-Market Mayhem,” Economic Commentary, September 25, 2008, First Trust)

In economic situations characterized by illiquidity, mark-to-market prices will distort the situation: “[W]hen accounting values are based on market prices, the volatility of asset prices directly affects the value of banks’ assets. This can lead to distortions in banks’ portfolio and contract choices and contagion. Banks can become insolvent even though they would be fully able to cover their commitments if they were allowed to continue until the assets mature."
(Allen, Franklin and Elena Carletti, “Mark-to-market accounting and liquidity pricing,” Journal of Accounting and Economics, Available online 19 April 2007, published August 2008, Pages 358-378)

Mark-to-market (Fair Value) accounting can create panic in volatile markets: “The fair value theory has particularly perverse results when applied in the midst of a market panic, when markets are neither liquid, active or orderly. What is the meaning of a ‘market price’ when there is no market? Of course you can make estimates by projecting cash flows and applying a discount rate. But which discount rate? The fair value theory forces the huge uncertainty premium or panic discount of distressed markets into the profit and capital calculations of entities whose contracted-for cash flows may all be realized.”
(Pollock, Alex, “Conceptual Problems with ‘Fair Value’ Accounting Theory,” Comments sent to the Securities and Exchange Commission, July 28, 2008)

Mark-to-market (Fair Value) accounting may be less informative and inaccurate: “The externality introduced by the marked to market contracts causes traders to possibly rationally trade on irrelevant information, making the prices used to mark their positions less informative.”
(Gorton, Gary, Ping He, and Lixin Huang, “Asset Prices When Agents are Marked to Market,” National Bureau of Economic Research, March 2006)

Economists of the European Central Bank (ECB) issued a stern warning against moving towards mark-to-market (fair value) accounting in 2004: "With a real estate crisis or a stock market crash... [a bank] under fair value accounting might aggravate the effects of the shock. Banks may be encouraged to react by panic selling and tightening lending standards, thus contributing to a further deepening of the crisis.”
(Fair Value Accounting and Financial Stability, by the European Central Bank, Occasional Paper Series, No. 13, April 2004)

The Federal Reserve called for reform of mark-to-market accounting in 2002: “The FASB has stated that it believes that all financial instruments should be reported at fair value when the conceptual and measurement issues of fair value are resolved. …The lack of reasonably specific standards for the estimation of fair values for non-traded, illiquid instruments could lead to problems for auditors and bank supervisors in verifying the accuracy of fair value estimates. … Therefore, the Federal Reserve has questioned the usefulness of comprehensive fair value accounting for all financial assets and liabilities in the primary financial statements. (emphasis added)”
(Remarks by Governor Susan S. Bies, [Presentation in Washington, D.C.], “Effective Accounting and Disclosure for Financial Transactions and Financial Institutions,” November 7, 2002)