First, the 2001 recession, by dramatically reducing profits, focused firms’ attention on restructuring and cost-cutting rather than on business expansion and likely induced some one-time gains in efficiency.
Generally, we are comfortable with the fair value measurement process for liquid trading instruments that financial institutions have had significant experience in valuing. However, we believe that for less-liquid assets and liabilities, reliability is a significant concern. Management bias The fact that management uses significant judgment in the valuation process, particularly for level-3 estimates, adds to our concerns about reliability.