Annual EBHS Conference, 39th Annual Economic and Business History Society Conference

Font Size: 
A Historical Examination of the Role of Politics in the development of Accounting Rules and Regulation
Michael Patrick Coyne, Janice Marie Traflet

Last modified: 2014-05-19


In the last 60 years, the role of politics in development of accountingpolicy has greatly increased throughout the world and most significantly in theUnited States. This has led to many unfortunate consequences.  To illustrate this problem this paper willstudy the development and changes in the last sixty year of one particularaccounting rule, the Mark to market rule. The practice of mark tomarket as an accounting device first developed among traders on futuresexchanges at the beginning of the 20th century. Over manydecades the rule evolved as it was refined and used to value new and morecomplex financial assets. For example in the 1980s the practice spread to bigbanks and corporations, far from the traditional exchange trading pits.Beginning in the 1990s, mark-to-market accounting began to give rise toscandals (specifically, the Savings and Loan crisis and the Enron scandal). Since the financial crisis began in the fall of2008, government officials, business leaders, accounting professionals andacademics have had heated debates about the appropriateness of the “Mark toMarket” accounting rule. These debates have been important because financialinstitutions in use this rule value their financial assets. Critics have arguedthese accounting rules and regulations have helped cause the rapid failure ofsome of the world’s largest financial institutions. Proponents of theregulations argue that they are essential for accurate reporting of financialassets. In addition, over many decades the rule becameincreasingly politicized as various financial institutions lobbied the UnitedStates Congress for changes to the rule. In this paper we will discuss thehistory of the mark to market rule, and we will explore parallels between thecurrent “Mark to Market” political/financial debates and similar debates thathave occurred in prior decades.