Here's a reason to be furious: right in the middle of the worst economic crisis since the Great Depression, the government has caved in to the big banks to allow them to cook their books
I'm surprised that there hasn't been more outrage on the left at the decision by accounting authorities, the FASB, last week to
allow tamper with "mark to market" accounting.
Here is a blog by Floyd Norris of the New York Times that lays out all the issues.
"Mark to market" may seem complex, but in essence it is really simple. What it means is that banks are required to properly value all the junk and crap on their balance sheets, so that people know how solvent they are or are not.
Obviously banks don't want to do that, and now they have gotten their way.
The Financial Accounting Standards Board changed the rules today, as expected, to give banks more leeway in determining what their assets are worth. The board says it is also requiring better disclosures, but it will be a week before we get details on that, and longer than that to see how the banks interpret that rule.
As readers of this blog know, the change came after a subcommittee of the House Financial Services Committee made clear that FASB could be destroyed if it did not knuckle under to the banking lobby.
Arthur Levitt and Bill Donaldson, two former chairmen of the Securities and Exchange Commission, bemoaned the politicization of the board, but the current chairman of the commission, Mary Schapiro, does not appear to have resisted the political pressure. That is understandable, but not necessarily admirable.
Barney Frank, head of the House Financial Services Committee, thinks it is a great idea:
"I applaud the very important actions taken by FASB today, which has made significant progress toward addressing inaccurate asset valuations in the markets. The FASB believes the rule can be applied more fairly and take into account the currently dysfunctional state of some markets. The integrity of the standard-setting process is preserved, while avoiding the pro-cyclical effects of improper valuation practices."
As Norris describes, the feds have backed down and forced accounting changes before. What's amazing to me is that it is happening again, smack in the middle of the worst financial crisis since the Great Depression.
This sucks, bigtime.
P.S. The head of this blog sucks. as did the first sentence. I believe in mark-to-market, and the ones tampering with it are involved in a con game.