Volcker: Accounting Panel Needs to be Independent

Why aren’t we listening more to this font of common sense and logic?

“A proposal to give banking regulators authority to block accounting standards is “a terrible idea,” Paul A. Volcker, a former chairman of the Federal Reserve Board, said Monday.

Mr. Volcker has been an outspoken critic of “mark to market” accounting that forced banks to take large write-downs in asset values, a position cited by banks earlier this year when they persuaded members of the House Financial Services Committee to demand changes in that rule.

But in an interview Monday, two days before a House committee vote on a proposal that would grant bank regulators the power to sidestep accounting standards, Mr. Volcker said he believed that accounting rules had to be set by an independent agency. He voiced concern that rising political pressures on both sides of the Atlantic were endangering that independence.”

The Financial Services Committee is to vote on amendments to a bill to establish a council of bank regulators as a systemic risk regulator, able to take action if bank activities threaten financial stability. . .

Mr. Volcker was the founding chairman of the International Accounting Standards Committee Foundation, which oversees the International Accounting Standards Board, and has long been a supporter of independent rule-setting. He has been campaigning for a single set of international accounting standards, but he said on Monday that he feared that effort was being undermined.”

Its quite likely that this power will be exercised in the next crisis, removing yet more transparency and data for investors; Worse still, the accounting exemptions will create a new class of zombie banks.

The amendment is strongly supported by the banks. In addition to removing Mark-to-Market accounting, it allows a systemic regulators “to order the Securities and Exchange Commission, which now oversees the Financial Accounting Standards Board, to suspend or change any accounting rule that the council thinks is a threat to financial stability.”

Here’s the most insane quote I’ve seen in a long time:

“The amendment has been endorsed by the American Bankers Association, which says the S.E.C.’s focus, on helping investors, is too narrow. The amendment has been strongly opposed by groups including the Chamber of Commerce and groups representing investors.” (emphasis added)

If this passes, there will be no end to the shenanigans banks can play in the next crisis. As we have sen, many financials insitutions have taken egregious advantage of the crisis they created.

This new reg will be a license to pillage . . .


Volcker Criticizes Accounting Proposal
NYT, November 17, 2009

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