Members of a House panel today clashed over efforts to press the Financial Accounting Standards Board to address concerns about “mark to market” accounting rules.
The hearing was organized by the House Financial Services capital markets subcommittee.
Several members said FASB, Norwalk, Conn., should ease mark-to-market rules as quickly as possible.
“Don’t make us tell you what to do,” said Rep. Randy Neugebauer, R-Texas. “Just do it. Just get it done.”
Rep. Alan Grayson, D-Fla., accused the critics of mark-to-market accounting of wanting to “shoot the messenger” for bearing bad but largely accurate news about the state of U.S. financial institutions.
“There seems to be a clamoring for changing the mark-to-market rules from institutions that seem to be insolvent,” Grayson said. “There seems to be a pattern here. … They don’t want to change the rules in the middle of the game. They want to change the rules when the game is already over.”
Mark-to-market accounting rules require banks, insurers and other entities to record some of the securities in their holdings at the curent “market value” every quarter, rather than assuming that the value at the time of purchase continues to be the correct value.
Witnesses at the hearing focused mainly on the effects of mark-to-marketing rules on banks and banks’ industrial borrower customers.
In October, at a U.S. Securities and Exchange Commission panel discussion on mark-to-market accounting, Bradley Hunkler, a representative for the American Council of Life Insurers, Washington, said he believed rigid use of mark-to-market accounting also has caused unnecessary fluctuations in life insurers’ balance sheets.
Subcommittee members said today at the capital markets subcommittee hearing that bank examiners are forcing banks to value assets at low prices set by dysfunctional markets, cutting off the flow of loans to factories.
Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, said the U.S. Securities and Exchange Commission, the Office of the Comptroller of the Currency and FASB should use whatever authority that they believe they already have to be more flexible about applying mark-to-market accounting rules, and that they should tell lawmakers if they need help with statutory requirements.