Feb. 25 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke said accounting standard-setters need to figure out how the mark-to-market rule blamed for worsening the global financial crisis should be followed when assets aren’t readily traded.

The rule, which requires companies to write down assets every quarter to reflect market value, is “a good principle in general” and shouldn’t be suspended entirely, Bernanke told the House Financial Services Committee today. “Accounting authorities have a great deal of work to do to try to figure out how to deal with some of these assets, which are not traded in liquid markets,” he said.

Citigroup Inc. and other financial companies say mark-to- market accounting, also known as fair-value, doesn’t work in illiquid markets because there aren’t enough prices available to determine the real value of assets. Treasury Secretary Timothy Geithner and the U.S. Financial Accounting Standards Board say the rule enhances the transparency of company balance sheets.

“I don’t see a suspension of the whole system as being constructive, because there is a great deal of information in valuing many of these assets,” Bernanke said today.

The U.S. Securities and Exchange Commission in a December report rejected calls to suspend fair-value accounting. The agency said the rule should be improved, and it “did not appear to play a meaningful role” in bank failures last year. FASB, which sets U.S. accounting rules, is studying ways to clarify how the standard is applied when markets are inactive.

To contact the reporter on this story: Ian Katz in Washington at ikatz2@bloomberg.net.

Last Updated: February 25, 2009 15:20 EST