NORWALK, Conn. – Members of the Financial Accounting Standards Board conceded yesterday they had bowed to withering political lobbying in order to ease controversial mark-to-market rules to help the balance sheets of banks and credit unions.
"There is a perception that we’re given in to political pressure, or what have you," said Lawrence Smith, a member of the five-person Board that writes the rules for generally accepted accounting principles, or GAAP. "But how can we ignore what’s going on around us."
"Standard-setting in a short period of time is never a good thing to be done," said Board member Marc Siegel, referring to the political pressure to change the accounting rules.
The extraordinarily quick change in accounting rules that were issued for comment only last month came just three weeks after members of Congress browbeat FASB Chairman Robert Herz during a hearing before a subcommittee of the House Financial Services Committee with threats to legislate the changes if the accounting rules-setters failed to act.
"Don’t make us tell you what to do, just get it done," said Rep. Michael Capuano, a Massachusetts Democrat.
"This is the FASB, not the slowsby–and we are going to have to have some movement," said Rep. Barney Frank, Massachusetts Democrat and chairman of the committee.
"One way or another, we’re going to find a way to get some relief of the assessment of these assets," said Rep. Paul Kanjorski, the Pennsylvania Democrat and congressional credit union champion.
"It’s a storm," said Rep. Spencer Bachus, Alabama Republican. "We can’t just sit around and talk. We need action and we need it now."
The extraordinary threats on the independent accounting rules-setters were preceded by heavy lobbying of lawmakers by the credit unions and banks, who have reported growing losses on their books due to mark-to-market.
Yesterday’s actions by the FASB will make easier for credit unions-especially corporate credit unions–to continue to carry distressed assets on their books all the way to maturity without taking a charge; to valuate the assets differently in inactive markets; and to separate out actual losses from market-value diminution.
But the FASB rejected pleas from corporate credit unions and banks to apply the new rules retroactively back to 2008, instead enacting them for the first quarter of 2009 on a voluntary basis, or for the second quarter for everybody.
