Robert Herz, chair of the Financial Accounting Standards Board, called the recent meltdown in the financial markets a result of the inadequacy of the financial regulatory system to oversee the growth of the derivatives market, at a speech he gave at a PricewaterhouseCoopers conference in New York on September 18, 2008.

?Balkanized regulatory systems, both in the U.S. and across international financial markets, may have made it difficult, if not impossible to rein in the exuberance driving the markets,? said Herz.

The derivative markets have lacked transparent pricing and clearing mechanisms, Herz said, resulting in an ?explosive growth of unregulated, opaque markets that lacked a proper infrastructure.?

?To some observers, it was a 'Wild West' version of financial markets in which the unchecked growth of products such as credit default swaps could suddenly swell to over $60 trillion in notional value, prompting the question: ?Where were the regulators??,? said Herz.

Some have attempted to blame fair value for the current financial mess, Herz noted.

?The concept of fair value, which was intended to help bring transparency, was scorned by some as a villain, exacerbating the turmoil, and heralded by others as a savior in revealing the problems on a timely basis,? said Herz.

Investors, however, have been calling for a current fair value of a company?s financial assets, Herz said. He gave his support for the continued use of mark-to-market accounting, saying there is no better alternative.

?The harsh reality is that we can?t just suspend or modify the financial reporting when there is bad news,? said Herz.