High and Low Finance - Bankers Point to the Rules as the Problem

High and Low Finance - Bankers Point to the Rules as the Problem - NYTimes.com: "On Thursday, members of a House subcommittee joined in demanding that the rules be suspended. It was a bipartisan lynching of the accounting rule writers.

The panel’s chairman, Representative Paul E. Kanjorski, Democrat of Pennsylvania, said the accounting rule “does provide transparency for investors,” but that “strict application” of the rule had “exacerbated the ongoing economic crisis.


Then he issued the threat. “If the regulators and standard setters do not act now to improve the standards, then the Congress will have no other option than to act itself.”

Sadly, a victory for the bankers would not help them much. Even if it were true that banks would be held in higher regard now if they had not been forced to write down the value of their bad assets — and that is, at best, debatable — changing the rules now would be counterproductive. Would you trust banks more? Would other banks be more inclined to trust banks?

It is true, as the bankers argue, that valuing illiquid instruments is tricky. And it is true that markets can overshoot. Some of these securities may well be undervalued now. But the solution is not to go to what Robert H. Herz, the chairman of the Financial Accounting Standards Board, calls “mark-to-management” accounting.

I call it “Alice in Wonderland” accounting, after Humpty Dumpty’s claim in that book that “When I use a word, it means just what I choose it to mean, neither more nor less.” After Alice protests, he replies, “The question is, which is to be master — that’s a..."

Norton's comment: Sadly, also this article is a year old but the banks and their congressional puppets are still messing around with Accounting Standards that would NOT fly as normal for private industry. The banks and the FED are still hiding junk assets / derivatives while listing them on their books at face value.  Can anyone tell me when was the last audit of the books on the FED, the US Treasury including an inventory of gold deposits at Fort Knox?  It is time for an audit!  Upps, who can we trust to do and report the audit?