When in doubt, blame the accounting rules

That's what's happening in the U.S., with respect to losses being recorded by some of the financial services firms. The requirement that financial instruments be 'marked to market' means that when the value of the loans (i.e. the investment in the loans made by the financials) falls, this needs to be reflected in the balance sheet.

Wall Street Journal article. Key grafs:

But these market seizures are what have made market values so contentious. Robert Herz, chairman of the body that sets the accounting rules governing the use of market values, the Financial Accounting Standards Board, acknowledged the difficulty investors and companies are facing.

"But you tell me what a better answer is," he said. "Is just pretending that things aren't decreasing in value a better answer? Should you just let everybody say they think it's going to recover?"

Others who favor the use of market values say that for all its imperfections, it also imposes discipline on companies. "It forces you to realistically confront what's happening to you much quicker, so it plays a useful purpose," said Sen. Jack Reed (D., R.I.), a member of the Senate banking committee.