Recently in these pages, Rep. Richard Baker discussed a bill he introduced that would put accounting standard setting squarely in the hands of the federal government and remove that responsibility from the private- sector Financial Accounting Standards Board.

The purpose of this bill supposedly is to give companies the right to take legal action against proposed accounting standards. They already have that right, making HR 3165 moot. Any Securities and Exchange Commission order regarding a FASB standard can be challenged in court under the Securities acts of 1933 and 1934.

In addition, the FASB offers a forum for all interested parties to air their concerns about proposed standards in meetings that are open to the public, as well as multiple opportunities to respond in writing.

Often, these concerns have led to substantive changes in a particular standard. The FASB gives everybody, if you will, their day in court.

So what's really going on here? The fact is, this legislation is aimed at one and only one goal: the watering down - if not outright elimination - of the FASB's proposed standard for the accounting of derivatives, and it was developed at the behest of a handful of people who make (and sometimes lose) a lot of money trading derivatives.

Derivatives are complex financial instruments that can be an effective risk management tool. However, as we have learned from several well- publicized incidents, they can also expose the institution or company that trades in derivatives to potential ruin.

The value of derivatives can fluctuate wildly, and in a heartbeat they can turn into a $10 million or $100 million liability for a company-enough to bring it to insolvency. If I were about to invest in a company, that's the kind of information I'd like to know about up-front.

Unfortunately, the millions of Americans who are faced with investment decisions for their retirement, the down payment on their first home, or saving for their children's education have no way to know whether a company may be in a precarious financial condition. These investors' futures are potentially at risk, simply because most derivatives need not be accounted for in financial statements.

A lot of people like it that way. Banks and companies that trade heavily in derivatives as a risk management, or "hedging," strategy like not having to tell how much money they have made (or lost) through hedging. As a result many of them have spent the last year or so trying to convince Congress to derail the creation of a derivatives standard-ironically, a standard that Congress itself asked the FASB to develop after the Orange County disaster.

HR 3165 would be a terrible blow to the efficiency of America's capital markets. It would politicize a process that was specifically designed 25 years ago to be immune from politics. As a private-sector standard-setting body, the FASB has no political agenda. Our only goal is the enhancement of transparency for the benefit and protection of the consumers of financial data: investors and creditors.

Rep. Baker's editorial asked whether political pressure has ever affected an SEC ruling. In 1978, Congress asked the SEC to consider a then recently issued standard on oil and gas accounting. The SEC subsequently issued a release that essentially nullified that standard.

A similar scenario took place in the 1960s with the FASB's predecessor over accounting for investment tax credits.

The last time the government intervened in accounting standards was in the late '70s and early '80s. In the wake of banking deregulation, many savings and loans fell prey to unscrupulous operators, whose shoddy business practices and, in some cases, malfeasance brought the S&L industry to the brink of collapse.

In its quest to save the industry, Congress passed legislation permitting S&Ls to ignore certain generally accepted accounting principles. S&Ls could continue to operate even after they actually ran out of money- notably, their depositors' money. It might have seemed like a good idea at the time, but in the end this politicization of accounting standards directly resulted in the largest taxpayer-financed rescue in history. L. William Seidman, the FDIC chairman at the time, called what happened "the worst mistake in the history of government."

Think it can't happen again? Look at the collapse of the Asian banking system, a calamity brought on to a large degree by reckless and wrong- headed hedging strategies built on derivatives. And right now, there are trillions of dollars in derivatives deployed in the United States alone.

Many of our constituents, including most investment professionals and the accounting profession, support the derivatives standard. Both the New York Society of Securities Analysts and its Boston cousin have publicly pledged support. So has the American Institute of Certified Public Accountants.

So who is it that believes Americans don't deserve more information about where they invest? Only a relatively few banks and, of course, the International Swaps and Derivatives Association, whose members' livelihood could be imperiled were responsible accounting of derivatives to come to pass.

Time after time, the FASB's process of deliberation and open debate has been proven to produce the best accounting standards possible, and the proof is that U.S. capital markets are the envy of the world.

Lawrence Summers, deputy secretary of the Treasury, summed it up when he said recently, "The single most important innovation shaping (the American capital) market was the idea of generally accepted accounting principles." Why would anyone want to risk our markets by politicizing the process to benefit the private interests of a few?

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