In Brief (two items)

FASB Preliminary Fair-Value Views

WASHINGTON - The Financial Accounting Standards Board on Tuesday issued its preliminary views on the methods - and practicality - of estimating the fair value of financial instruments.FASB project manager Ron Lott said in a statement that the agency is "committed" to resolving the conceptual problems associated with placing a value on financial instruments. The board's preliminary views address such questions as the meaning of fair value, what instruments should be reported at fair value, and how changes in fair value would be reported.

FASB rules already require U.S. firms to use fair-value accounting for some financial instruments. Under fair-value accounting, an asset or liability is valued on the basis of an estimate of what investors would pay for it on the open market. Under a cost-based value system, by contrast, the value is based on the item's original cost.

Some in the accounting field believe fair-value accounting would make banks more transparent to investors. But bank trade groups and even some bank regulators disagree, saying it makes no sense to require fair-value accounting of an asset that a bank plans to hold or for which there is no market.

The FASB's preliminary views can be seen on the agency's Web site at www.fasb.org. Public comments are invited through May 31.

- Scott Barancik


Home Loan Banks Gain More Autonomy

WASHINGTON - The Federal Housing Finance Board took initial steps Tuesday to pull away from the business administration of the 12 Federal Home Loan banks.The regulator proposed letting the banks decide on dividends, budgets, bylaws, hiring, and senior management salaries, as well as the format of advance applications. The plan, which is scheduled to be published shortly and open for comment for 30 days, would implement part of the new financial reform law.

However, the new law also would cut the compensation of Home Loan bank boards by as much as 48% - to $25,000 for chairman, $20,000 for vice chairman, and $15,000 for directors. Terms for all directors would become three years, rather than two years for those elected and four for those appointed.

Separately, the Finance Board proposed the system's debt be issued in the name of the 12 Home Loan banks to underscore that the banks are responsible for making interest payments. The agency also offered to let its Office of Finance administer pilot programs that invest in mortgages made by member banks and thrifts. This proposal will be published shortly and open for comment for 60 days.

- Katharine Fraser

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