SEC's Schapiro says New Guidance For Mark-To-Market In 2nd Qtr

[Cdntrader]

WASHINGTON, March 11 (Reuters) - The Financial Accounting Standards Board has promised to issue new mark-to-market accounting guidance for banks struggling to price assets in an illiquid market, the head of the U.S. Securities and Exchange Commission said Wednesday.
"FASB has committed to us that the guidance will be out in the second quarter ... We are continuing to push them," SEC Chairman Mary Schapiro said at a hearing by a House Appropriations subcommittee on the agency's annual budget needs.
The mark-to-market accounting rule is defended by investor advocates and some lawmakers as a way to give investors a clear picture of what assets are held on banks' books.
But the banking industry, which has been forced to write down billions of dollars' worth of hard-to-value assets in the illiquid markets, has pleaded for a suspension or modification of the rule.

On Tuesday, Federal Reserve Chairman Ben Bernanke said he favored "some improvements" to address what he described as the "weak points" of mark-to-market accounting.
A separate House panel has scheduled a Thursday hearing to examine what kinds of incremental fixes to the rule might be possible.
Schapiro also said she hoped the SEC would issue a proposal in April aimed at restoring the so-called "uptick rule" that restricts short-sellers. The uptick rule, adopted after the 1929 stock market crash, allowed short sales only when the last sale price was higher than the previous price, but was abolished by the agency in 2007.

 

[chartman]

What better method is there than mark-to-market assets to their current actual market value. Any other method is 'doctoring' the books. The government was suppose to being doing a 'stress test' of banks last week. What happen to that report? Was it too 'bad' to release? Is the FDIC letting numerous banks stay afloat that should be closed? Banks are not going to lend to other banks until all of the toxic assets are revealed. Might as well open the books and have full disclosure.

 

[JamesVU2000]

Couldnt be more obvious that the world is heading for a serious depression. The political system is in denial and is not equipped to handle the situation

 

[texrex2002]

Quote from chartman:

What better method is there than mark-to-market assets to their current actual market value. Any other method is 'doctoring' the books.

Agree somewhat. To mark properly the assets have to be fungible, which I don't think they are. Also, in the absence of transactions in the market, what are you going to mark them to? It would be analogous to valuing everyones house in the neighborhood on just one sale, because that's all the data there is, and completely disregard whether it was a foreclosure sale to an investor at a seemingly steep discount, a divorce forced sale with one spouse selling with the sole motivation of depriving the other of a gain (or, conversely, a daisy chain sale where the house sells way high).

Both marking and not marking can be cooking the books. Maybe some sort of rule that forbids the sale of any derivative not accounted for in MtM terms for a number of years would be a good idea, so that firms can't just willy-nilly change their accounting treatment (and/or stated management policy on the disposition of these assets) depending on the mtm position. The more I think about it that idea sucks too... Maybe discount any illiquid derivative position that doesn't lend itself to marking by 70% for all reserve requirement calculations. shoot, I don't know...

Quote from chartman:

The government was suppose to being doing a 'stress test' of banks last week. What happen to that report? Was it too 'bad' to release?

Good point. I haven't heard anything further either. I hate big fanfare announcements with no follow through. It deepens in me the thought that those people suck at getting things done. The FDIC did apply for an additional $500B of conjured up $ though. Not sure if it was a result of the stress test or co-incidental timing.

^ speaking of that, they need to conjure up a few hundred billion to give to my insurance companies too. High insurance rates are bad for banks, but good for people??? Everytime there's a hurricane my insurance rates go up. But if banks' insurance rates have to go up because of an event, then WHOOAAA, DOGGIE! let's print up some money to give to the insurance entity to offset rate increases!!! I need to get a second job as a radio host (I'm too ugly for TV) for shallow thinkers that are easily riled up by someone pointing out ideologically percieved unfairness.