Comptroller General Warns Against Excessive Leniency
WASHINGTON - Treasury Department initiatives to spur bank lending may instead result in too much forbearance by examiners and auditors on bad loans, Comptroller General Charles A. Bowsher warned Thursday.
In a speech to bank accountants, Mr. Bowsher said he is worried that the credit-loosening measures unveiled last month reflected a growing sentiment for watering down bank accounting standards.
If auditors loosen generally accepted accounting principles, he said, the banking industry could slip into shoddy accounting practices like those that masked the dimensions of the thrift industry's losses in the 1980s.
A Need for Good Accounting
As head of the General Accounting Office, Mr. Bowsher is the Congress' chief accounting watchdog.
"If we don't have good accounting, that means everybody is being misled," Mr. Bowsher told a conference sponsored by the American Institute of Certified Public Accountants.
After the speech, he told reporters that real estate examination guidelines issued by four regulatory agencies last week are "confusing."
"If I were an examiner or an auditor, it might lead me to more forbearance, or not representing [asset quality] accurately," Mr. Bowsher said.
The real estate guidelines, the latest of several installations in the administration's plan to ease the credit crunch, are expected to result in fewer loans being classified as bad risks.