WASHINGTON — One of the key lawmakers who convinced the Financial Accounting Standards Board last spring to change mark-to-market rules as banks and credit unions were toppling vowed yesterday to end his push to change accounting rules.
"I only got involved with mark-to-market when I thought it was going to be very injurious to the system back in March," said Rep. Paul Kanjorski, the chairman of the House Financial Services Subcommittee on Capital Markets. "We're not going to go on playing with that. It was an unusual, special place."
After a withering lobby by banks and credit unions-especially corporate credit unions - lawmakers called on the FASB to amend the rules on mark-to-market in order to take into consideration the vast diminution in value of assets, particularly mortgages-backed securities, derivatives, and other financial instruments during the financial crisis.
During the March 12 hearing before the Financial Services Committee members from both parties browbeat Robert Herz, the chairman of the FASB, and insisted the accounting board ease the rules to aid troubled institutions. "One way or another, we're going to find a way to get some relief of the assessment of these assets," said Kanjorski, the chairman of the panel holding the hearing and one of several lawmakers to call for a change in the rules at the session.
The FASB, which typically takes years to debate new rules, responded by easing its mark-to-market standards within weeks.
Kanjorski, who convened the extraordinary hearing said yesterday after speaking at NAFCU's annual Congressional Caucus, he has no plans to revisit the accounting rules.
The Pennsylvania Democrat, a long-time credit union champion on Capitol Hill, said he was only acting because of the "harshness" of the asset value determinations required under mark-to-market.
After the FASB bent to the congressional lobby, an expert panel, called the Financial Crisis Advisory Committee, criticized Congresses interference in the independent rule-making process normally undertaken by the FASB and urged that Congress and other policymakers stay out of accounting rule-making. "Such restraint is important in maintaining public confidence in the independence of the standard setting process, and, thus, in financial reporting and the financial system as a whole," wrote the group in a report.
The unusual hearing was preceded by an intense lobbying effort by the banks and corporate credit unions to convince the FASB to bend the rules or change them. For months representatives from U.S. Central FCU, WesCorp FCU, and several other corporates lobbied both the FASB and Congress with letter-writing campaigns, phone calls and outside lobbyists.
At the hearing lawmakers threatened to rein in the FASB's independence if it did not change the rules quickly. "Just get it done. Stop dithering. Don't make us tell you what to do," 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 full Financial Services Committee.
"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."
After the browbeating, Herz returned to the FASB's Stratford, Conn., office where he and the rest of the five-member board fashioned changes to mark-to-market which, among other things, allowed entities to separate actual expected losses, from the mere diminishment of market value in unrealized losses. It also gave additional guidance on valuing assets in distressed or inactive market. Both changes will help corporate credit unions continue to hold distressed mortgage-backed securities on their books until maturity, preventing them from having to realize billions of dollars in losses.
