FDIC Chairman Sheila Bair doesn't believe banks should measure their loans at fair value on the balance sheet

In the series I've seen it all, heard it all, here's a quote from the remarks by FDIC Chairman Sheila C. Bair titled The Financial Crisis and Regulatory Reform at the SIFMA National Conference on the Securities Industry (November 17, 2010)

Another ongoing regulatory process is FASB's proposal to substantially revise the accounting standards for financial instruments. Under the proposed rule, banks would be required to measure substantially all of their financial instruments at fair value on the balance sheet.

While we understand that the objective of the rule is to make financial statements more transparent, we believe that its effect could be to undermine financial stability by making bank performance more procyclical. In short, we do not believe that a bank – whose business strategy is to hold loans and deposit liabilities for the long term – should be required to measure them at fair value on the balance sheet. Why? Because fair value does not necessarily reflect the manner in which the cash flows associated with these instruments will be realized or expended.