Privately held fortunes were valued at book value or by coupling estimates of revenues, profits or book value to prevailing ratios for similarly publicly traded companies.

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Mr Isaac reckons that many of the measures that were introduced to instil discipline notably fair-value accounting, which forces banks to mark assets to the prevailing market price actually exacerbated the latest crisis.

ECONOMIST: Learning from the past

If all or many investors redeem at the same time, the fund will be forced to sell securities at fire sale prices, causing the fund to break a dollar, but also depressing prevailing market prices and thereby placing pressure on the ability of other funds to maintain a stable net asset value.

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