An excellent new paper from Andrew Haldane of the Bank of England provides a breezy summary of the debate over fair-value accounting. In an account that spans 15th-century Italy to the present day—with the likes of Shakespeare, Goethe and Mussolini making unexpected appearances along the way—Mr Haldane neatly portrays the arguments for and against marking assets to market, both past and present. (Other aspects of the paper are addressed in this post at Alphaville.)

The strength of banks’ current opposition to fair-value measurement is made clear by comparing the profits reported by British banks between 1999 and 2008 with what they would have reported if required to mark banking books to market in addition to trading books. Between 2001 and 2006, greater use of fair-value accounting would have added £100bn in profits. However, in 2008 the hypothetical loss to banks would have been some £300bn more than reported. “Had shareholders not already torn it out, this rollercoaster ride in profits would have been hair-raising,” Mr Haldane writes.

In a fair-minded conclusion—so to speak—he notes that “now would be an unfortunate time to starve balance sheets of the sunlight provided by fair values.” But on the other hand, “too much sunlight can scorch.”