Last month the Financial Accounting Standards Board changed is mark-to-market accounting rule and its approach to other than temporary impairment (OTTI), under pressure from a Congressional deadline. In short, the FASB staff granted financial institutions more discretion in applying mark-to-market standards to assets caught in illiquid markets, and allowed impaired debt securities reflected in earnings to be tied to credit losses instead of market losses. The financial sector welcomed these changes, but considered them half-measures, and they continue to press for more.
A bevy of financial-sector groups made this clear in a letter delivered last week to Rep. Barney Frank (D-Mass), chairman of the House Committee on Financial Services and Sen. Spencer Bachus (R-Ala.) ranking member of the committee. The American Bankers Association joined the American Council of Life Insurance, the American Insurance Association, the Council of Federal Home Loan Banks, and the Financial Services Roundtable in amplifying their reservations about mark-to-market and OTTI accounting rules. While praising the FASB for moving “expeditiously as the Committee requested,” the letter complained that the “changes only scratched the surface.”