Congress is being heavily lobbied by the banking and insurance industries. Witness the recent relaxation of the “mark-to-market” accounting rules which now allow banks to use significant judgement in revaluing their assets.

And now, in a new letter to Congress dated May 13, 2009, the American Banker’s Association seem to want to go back to the heady days of the S&L crisis, scrapping fair value accounting in all but name (see earlier post).

This is unfair to healthy banks and those that have adhered to regulatory guidelines. Representative Alan Grayson (D-FL) is quoted as saying…”what healthy banks tell me, not just in Orlando, is that they’re facing unfair subsidized competition from bad banks who are excused from capital requirements and borrow seemingly unlimited amounts of money from the government at advantageous rates…When mark-to-market becomes mark-to-whatever-you-feel-like, you can’t tell anymore whether banks are meeting their capital requirements or not.”

Geithner and the Treasury Department must stop re-capitalizing bad banks with taxpayer dollars and allow the healthy banks to step in and pick up the pieces. This is, after all, the proper capitalist approach.

(Source: WG&L Accounting & Compliance Alert: “Bankers make another plea to dump fair value”)

Judicial Watch filed a Freedom of Information Act request to obtain documents from the Treasury Department concerning the October 2008 bailout meeting with our country’s nine largest banks. Apparently, the bankers were made an offer they couldn’t refuse.

The critical meeting on October 16, 2008, included Hank Paulson, Ben Bernanke, Tim Geithner and the heads of the aforementioned banks, among others. The documents uncovered by Judicial Watch indicate that the Treasury Department gave the banks no choice but to take government funds.

One of the key sentences in the government’s talking points – “If a capital infusion is not appealing, you should be aware that your regulator will require it in any circumstance.” So there you have it.

The banks then literally filled in the blanks on a half sheet of paper and billions of dollars were offered up. The claim for Bank of America’s $15bn is shown below.

The quote that comes to mind when I see the heavy-handedness of this is from The Tragedy of King Richard The Third. After killing her husband (Edward, Prince of Wales), Richard makes a play for Lady Anne’s affections

Was ever woman in this humour woo’d?

Was ever woman in this humour won?   (Act I, ii, ln 229)