Under New FASB Accounting Rule, Toxic Assets May Be Revalued By Banks

April 3, 2009 by · Leave a Comment
Filed under: Legal News 

Well this is were we have come.  Instead of letting the market determine the price of assets on their books, we instead changed the accounting rules so they can set the price for them and then ultimately sell them off and higher than actual value.   This move was a bad one and will backfire on the regulators face.   All this tells me, is the banks are in a much worsen condition and they had to play an accounting trick in order to no be insolvent.  This does not bring confidence back to the market or fool any of the smart money out there. Good job.

News (Washington Post):

The board that sets U.S. accounting rules voted yesterday to let financial firms report higher values for some troubled assets, a controversial step likely to increase some banks’ reported earnings but also heighten suspicions that the companies are concealing problems.

The move by the Financial Accounting Standards Board was made with unusual speed under intense pressure from Congress and the financial industry, which have argued that the old rules exacerbated the financial crisis by forcing banks to overstate expected losses.

But the decision to ease what are known as mark-to-market requirements has raised concerns among some financial experts who warn that it will become harder for banks and investors to agree on what the troubled assets are actually worth and thus discourage their sale. The ability of financial firms to sell assets to investors is considered essential for an economic revival because this could restore the major source of funding for bank lending to consumers and businesses.

The board also has faced a storm of criticism from accounting and investor groups who view yesterday’s move as evidence that it lacks the necessary independence and strength to uphold its judgments in the face of pressure. The nonprofit board, whose decisions are enforced by the Securities and Exchange Commission, proposed the changes four days after it was told to do so by angry members of Congress.

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