Bankers' Paradise

[David Farber <dave () farber net>]

Begin forwarded message:

From: dewayne () warpspeed com (Dewayne Hendricks)
Date: May 23, 2009 12:40:53 PM EDT
To: Dewayne-Net Technology List <xyzzy () warpspeed com>
Subject: [Dewayne-Net] Bankers' Paradise

Bankers' ParadiseCapitolism
by CHRISTOPHER HAYES
This article appeared in the June 8, 2009 edition of The Nation.
May 20, 2009
<http://www.thenation.com/doc/20090608/hayes>

No matter how discredited and despised Wall Street executives may be  
across the country, their clout remains unrivaled on Capitol Hill.  
Judging from how much traction the American Bankers Association gets  
with lawmakers, you'd think it was an organization devoted to the  
interests of puppies and adorable children.
It's one thing for the banks to maintain a broken status quo, but it's  
another for them to work to break things further, by pushing an  
industry-friendly change through Congress in the midst of the crisis.  
Recently, in the case of mark-to-market accounting, that's just what  
they did.

The idea behind mark to market is pretty straightforward. If a bank  
owns, say, a mortgage-backed security, it must enter the value of that  
security in its books at the price the security can fetch on the  
market. If the security can get 80 cents on the dollar, it goes down  
as .80 in the books. If it can get only 20 cents, it goes down as .20.  
The standard enforces transparency by making banks sync their internal  
valuations with external prices.
Banks have whined about mark to market ever since it was codified in  
2006. But it wasn't until last spring, as the subprime crisis gathered  
steam, that they began beating the drums for a change. They complain  
that the current panic has frozen the markets for many of their  
esoteric securities, artificially depressing the prices and therefore  
making their balance sheets look far worse than they really are.

The week after Lehman Brothers failed, as both conservative and  
progressive House members balked at the initial TARP plan, a number of  
lawmakers became convinced by onetime FDIC chair William Isaac that  
mark-to-market accounting was the culprit and that simply suspending  
or abolishing it was all that was needed to see us through.

They were ignored at the time, but the conservative noise machine ran  
with the idea (op-eds in the Wall Street Journal, rants on CNBC) and  
the banks kept working over Congress.

Finally, in a deft bit of bank-shot lobbying, the American Bankers  
Association, the Chamber of Commerce and others pressured the House  
Financial Services subcommittee on capital markets, insurance and  
government-sponsored enterprises to convene a hearing in March on  
accounting standards. There, members of both parties browbeat  
representatives of the independent Financial Accounting Standards  
Board for excessive fidelity to their precious rules. (Representative  
Randy Neugebauer of Texas: "Don't make us tell you what to do. Just do  
it. Just get it done.") Three weeks later, after a truncated process,  
the five-member FASB voted 3 to 2 for changes that would relax mark-to- 
market requirements. The two dissenting board members issued a  
minority report warning that the new rules could help hide losses and  
impair long-term economic growth.

[snip]
RSS Feed: <http://www.warpspeed.com/wordpress>




-------------------------------------------
Archives: https://www.listbox.com/member/archive/247/=now
RSS Feed: https://www.listbox.com/member/archive/rss/247/
Powered by Listbox: http://www.listbox.com