The FASB is under attack by banking lobbyists

The FASB, the independent corporate accounting standards board, is under attack. Believe this or not, financial lobbyists are trying to get it's independence dissolved so they can cook the books whenever they damn feel like it.

This article, Civil War In Corporate America: Banks Battling The Chamber On Accounting Rules outlines these latest attempts.

Amid the ongoing financial regulation overhaul, the banking industry is hoping to pull off a quiet power grab that has eluded its grasp since the Great Depression, by stripping the independence of the board that sets financial accounting standards.

The move could effectively let banks set their own accounting standards in rough economic times.

The Logical Flaw


Looks like the Admin, Congress and the FASB have cross purposes. Now the banks have a real problem.  Banks can't execute mortgage mods without adjusting the values (read losses) on their balance sheets.


Why, after arguing for banks to have more leeway, is Congress now pushing back? Because many government responses to the financial crisis are more about manipulating prices -- and behavior -- than truly getting markets back on their feet.

FASB Give It and FASB Take It Away.

In April, FASB (Financial Account Standards Board) caved to incredible pressure from financial conglomerates and politicians when it agreed to severely limit "mark to market" rules (FAS 157). But, did FASB get a little revenge with the decision to eliminate the exemption of Qualified Special Purpose Entities from balance sheet treatment.

This is how financial conglomerates used Qualified Special Purpose Entities:

Lenders recorded profits before the U.S. subprime mortgage market collapsed in 2007 by selling pooled loans to off-balance- sheet trusts, which repackaged the pools into mortgage-backed securities. Banks then sold those securities to other off- balance-sheet vehicles they sponsored, concealing from investors that the securities were backed by deteriorating mortgages.

FASB pressured into mark to market changes

Looks like the financial oligarchs are firmly in control of the nation. The FASB relaxed the rules:

The Financial Accounting Standards Board, pressured by U.S. lawmakers and financial companies, voted to relax fair-value rules that Citigroup Inc. and Wells Fargo & Co. say don’t work when markets are inactive.

The changes to so-called mark-to-market accounting allow companies to use “significant” judgment when gauging the price of some investments on their books, including mortgage-backed securities. Analysts say the measure may reduce banks’ writedowns and boost their first-quarter net income by 20 percent or more. FASB voted 3-2 to approve the rules at a meeting today in Norwalk, Connecticut.

The Wall Street Come Back - Due to SEC Possible Change of Accounting Rules Mark-to-Market

While the pundits threaten and promote Paulson's bail out plan, there are actually other things going on which Wall Street seems to like.

"News that the SEC is working with FASB [Financial Accounting Standards Board] on 'fair value' accounting rules that could delay implementation of the onerous mark-to-market provision are giving stocks fresh legs higher," according to analysts at Action Economics

From CBS Market Watch.

SEC and FASB in negotiations: