Both the “mark to market” valuations for businesses set by FAS157 and the same effectivley for banks through Basel 11 which built on the original Basel accord, have set in place mechanisms which are prone to, and I believe designed to, the cascading effect. Looking at the effects of this or that regulation is a bit like trying to piece together what happened after a nuclear explosion by focusing on the cascading atomic reaction rather than on who designed and built this bloody bomb and who triggered it. In our case it is the bankers and their various regulatory bodies such as the Bank for International Settlements (BIS).
Here we have the industry looking at the cascading effect:-
Read more @ James' Blog, Winter Patriot
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