UPDATE 1-US lawmakers urge SEC to suspend fair value accounting

(Adds details from letter, background)

WASHINGTON, Sept 30 (Reuters) - A bipartisan group of more than 60 U.S. lawmakers on Tuesday urged the Securities and Exchange Commission to suspend its fair value accounting rule, which has been partially blamed by some for forcing U.S. banks to take big write-downs.

In a letter addressed to SEC Chairman Christopher Cox, the lawmakers urged the agency to suspend the accounting rule immediately and replace it with a rule that "more accurately reflects" what they called the "true value" of assets.

Fair value, also known as mark-to-market or FAS 157, requires financial firms to value assets based on what they could fetch in a market transaction -- a requirement favored by some investors and accountants as giving a true picture of companies' financial statements.

When there is no market, the hardest-to-value assets are often based entirely on management's best estimate derived from mathematical models.

On Tuesday, the SEC reaffirmed that management's internal assumptions can be used to measure fair value when relevant market evidence does not exist.

The lawmakers said that in an illiquid market, the accounting rule has become counterproductive and is making the situation worse.

"The mark-to-market rule, while well intended, has the unintended consequence of exacerbating economic downturns by hamstringing the ability of banks to make loans to consumers and businesses," said the letter, signed by lawmakers such as Rep. John Shadegg, a Republican from Arizona; Rep. Peter DeFazio, a Democrat from Oregon; and Rep. Joe Barton, a Republican from Texas. (Reporting by Rachelle Younglai; Editing by Gary Hill)