A US House of Representatives panel got a pledge late last Thursday night from the Robert Hertz, Chairman of the independent Financial Accounting Standards Board to issue guidelines within three weeks that will ease the Mark to Market (MTM) rules that force US banks to value assets at current prices. The head of the US House panel, Rep. Paul Kanjorski (D-Pa.), held out the threat of legislation to pressure the standard setting board and the Securities and Exchange Commission to take steps that would give relief to battered US banks and US insurance companies. The current MTM rule has forced US banks to take steep write-downs on some financial assets, especially securities linked to mortgages, even as they have suffered from the housing slump. As the financial crisis grinds on and world banks large and small founder and fail, the banking industry has pushed for the accounting relief.
Popularity: 6% [?]
March 19th, 2009 at 4:09 am
The MTM rule is too tough and it suggests that any one bad apple in the barrel has already spoiled every apple in the world. Accountants love the rule because they can’t be wrong. If things go badly, like they have accountants can say, we used the rule. If things turn around, the accountants can say, we will see if the trend continues.
MTM should be revised. There are many good apples in the barrel and financial statements should reflect the good and bad, not just the bad. A finnancial statement is not a worst case instrument.