Is Accounting Rule Anarchy a Good Idea?

Via John Carney (H/T Going Concern). 

Here’s what I don’t get: why do we need one set of accounting standards at all? To put it differently, why should banking regulators feel obliged to judge the safety and soundness of financial institutions according to any measure that they do not like? If Bair doesn’t think fair value is appropriate to the banking sector, can’t she just ignore fair value when judging whether banks satisfy regulatory requirements?

What’s the harm in letting shareholders know the fair value of financial instruments held by banks? Is it the fear that investors will react irrationally? It seems to me that during the financial crisis of 2008, it was the lack of information that induced panic rather than the supply. Do the regulators think keeping investors in the dark about the fair value of the balance sheets of banks will produce investor confidence?

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