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”)