It’s being billed as an outrageous piece of behind the scenes lobbying by Big Finance. Moves are afoot to overlay the Financial Accounting Standards Board, which sits inside the SEC, with a new “oversight board” - a regulator’s regulator, if you like.
The subtext here is all about mark-to-mark accounting: this new oversight board would be able to suspend accounting rules if they were deemed to pose a systemic threat to the financial system in the future.
And its caused Ryam Grim at Huffington Post, to huff:
Civil War In Corporate America: Banks Battling The Chamber On Accounting Rules
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.
Astonishingly, at a time when the public is crying out for greater regulation to limit excessive risk-taking by financial institutions, the banks are trying to get Congress to agree that the next time there’s a big downturn, they should have the ability to alter their accounting standards — essentially, fudge the numbers — so that the public and investors won’t be able to tell how insolvent they really are.
Civil war? Barney Frank, the house financial services committee chairman who is claiming not to have made up his mind on whether to support the oversight move, reckons Grim has got his story upside down.
As he told HuffPo:
You have this caricature in your heads. You literally don’t understand the way the world works,” he said. “It’s the community banks, the credit unions, who are driving this…Seriously, the community banks have the political clout here. Not the Wall Street banks.
There may well be something in this. While Wall St can now claim to have put much of the crisis behind it, community banks across the country are going down like nine-pins.
Some 115 banks have failed so far this year, while back in June the FDIC warned that it was monitoring another 416 “problem” institutions. No wonder they’re lobbying so hard.
Related links:
Bank Failures Buffeting FDIC Efforts to Bolster Insurance Fund - Bloomberg
Bank failures bulk up to 115 - Dealscape
