US banks changed how they report the value of mortgage-backed securities after a new accounting rule allowed more flexibility. This rule, FSP 157-3, lets banks adjust the reported value when the market for these assets is not active. The study found that banks used this flexibility to report values that were less influenced by economic factors and more reflective of their own mortgage-banking activities. This means that the new rule led to more discretion in reporting the value of mortgage-backed securities.