Thursday, March 12, 2009

Mark to market change after S/P lost 50%+ of value? You too lost your chance to be invited to Rick Santelli's Tea Party in early '08!

WASHINGTON (Dow Jones)--In a surprising reversal, House Financial Services Subcommittee Chairman Paul Kanjorski, D-Pa., said Thursday that Congress will have no choice but to intervene if regulators and the U.S. accounting standards board don't act soon to improve mark-to-market accounting rules. He made his remarks at the start of a hearing Thursday on the controversial accounting rule, which has forced banks to write down billions of dollars worth of assets on their books because of the deteriorating market conditions. Mark-to-market rules requires them to list their assets at current market value. "Previously, I have taken the position that the Congress should not interfere through legislation in the area of establishing specific accounting rules. It seemed best that such technical work be left to the regulators, standard setters and financial experts," Kanjorski said. "We can, however, no longer deny the reality of the pro-cyclical nature of mark-to-market accounting," he added. "It has produced numerous unintended consequences, and it has exacerbated the ongoing crisis. 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." Kanjorski was careful to say that a Congressional intervention shouldn't imply support for an all-out suspension of mark-to-market rules, as many banks and some lawmakers have called for in the past. The lawmaker said he isn't in favor of doing away with the standard because it would "revert to the very kind of subjectivity and sleight-of-hand that made mark-to-market necessary in the first place." "The standard does provide transparency for investors, but its strict application in the current environment is, in too many instances, distorting rather than clarifying, the picture," he said. His comments came ahead of testimony in which representatives from the Securities and Exchange Commission, the Office of the Comptroller of the Currency and the Financial Accounting Standards Board are expected to say they oppose suspending the rule. Following a study the SEC submitted to Congress late last year, FASB has said it is working to provide additional guidance on the issue and hopes to present its findings by the end of the second quarter of the year. Critics of the rule and its application, including the American Bankers Association and the U.S. Chamber of Commerce, have called on FASB to pick up the pace on providing guidance, saying the matter is urgent. Those concerned about mark-to-market accounting have also said the rule has hurt the ability of banks to maintain regulatory capital requirements. On Thursday, Kanjorski urged the OCC to liberalize regulatory capital requirements and grant "reasonable forbearance in the current economic environment." One idea he said is worth consideration would be to separate an asset's losses due to credit risk from its losses due to liquidity risk when applying mark-to-market accounting rules. -By Sarah N. Lynch, Dow Jones Newswires; 202-862-6634; sarah.lynch@dowjones.com Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/access/al?rnd=F9bOn6dSKEDD%2Fhvv3LCENQ%3D%3D. You can use this link on the day this article is published and the following day. (END) Dow Jones Newswires March 12, 2009 10:22 ET (14:22 GMT) Copyright (c) 2009 Dow Jones & Company, Inc.- - 10 22 AM EDT 03-12-09

4 comments:

putster said...

Thanks so much for your updates - I agree that fundamentals do not support a rally at this time.

Anonymous said...

You guys are so god damn wrong! This market doesn't operate under fundamental.

Anonymous said...

Admit it. You guys F**ked up. Stop calling nonsense level.

putster said...

We'll see over the next week and a half....