Congress has demanded that the Accounting Standards Board get rid of the “mark to market” rule and, probably as early as today, banks will now be able to value their toxic assets at whatever they say they’re worth.
This is the same philosophy that drives so many of my fine colleagues in this town when dealing with real estate: if you don’t like what the market says your client’s house is worth, just come up with a value they do like. When it doesn’t sell, look around for someone to blame.
If he hasn’t retired by then, look for Chris Dodd to be in front of the cameras three years from now, face red, finger jabbing, demanding to know why bankers lied to the American public. In this case, since it is the bankers who have asked to discard the rule, they’ll deserve everything that slimy blowhard sends their way.
UPDATE: The NYT’s Floyd Norris is on the story:
Under intense political pressure, the board that sets accounting rules in the United States will meet on Thursday to complete changes in accounting rules that are aimed at reducing the losses banks have been forced to report as the values of their mortgage-backed securities have crumbled.
The changes, proposed two weeks ago after a Congressional hearing in which Robert H. Herz, the chairman of the Financial Accounting Standards Board, was essentially ordered to change the rules or face Congressional action, are generally supported by banks, although some want the board to go even further.
But they have produced a strong reaction from some investors, with one investor group complaining that the changes would “effectively gut the transparent application of fair value measurement.” The group also says changes would delay the recovery of the banking system.
UPDATE II: Lest we forget, three years from now, Barney, “There’s nothing wrong with Fannie Mae!” , Frank is also behind this rule change.