Banks are pushing for a change to banking rules that would allow them to ignore mark to market accounting for assets in markets that they deem “inactive.” In other words, if a bank is loaded with worthless assets but decides that the market for those assets is frozen, they can value those assets higher than the market would. Or to simplify it even more, they can create value out of toxic assets. And it looks like now the Financial Accounting Standards Board, which so far has been against this rule change, is caving in.

The Huffington post points out that this is an abrupt about-face for the FASB:

The move marks a shift for Robert Herz, head of the FASB, who recently told a panel of lawmakers that the harshest critics of mark-to-market accounting practices have been the very same banks that have gone under when regulators would not let them adjust their accounting. Herz and other regulators have been under intense congressional pressure to reform the rules.

“I will tell you that I get calls and visits from some of those institutions that are now in government hands, about two weeks before they get taken over, trying to get the accounting changed,” he said. “Clearly some of the most vocal opponents of fair value and mark-to-market have been some of those institutions that ultimately failed and have had to have billions of taxpayer dollars put into them.”

If you’re interested in having a say on this issue, read the full article at Huffington Post and check out the info below.

The public is entitled to comment on the rule change until April first. Comments can be e-mailed to director@fasb.org — File Reference: Proposed FSP FAS 157-e. Or send snail-mailed Technical Director, FASB, 401 Merritt 7, PO Box 5116, Norwalk, CT 06856-5116, File Reference: Proposed FSP FAS 157-e.

“New Rule Would Allow Banks To Choose Values Of Their Assets” [Huffington Post] (Thanks to Marge!)
(Photo: The Sierra Club)

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