Volcker: Accounting Panel Needs to be Independent
Why aren’t we listening more to this font of common sense and logic?
“A proposal to give banking regulators authority to block accounting standards is “a terrible idea,” Paul A. Volcker, a former chairman of the Federal Reserve Board, said Monday.
Mr. Volcker has been an outspoken critic of “mark to market” accounting that forced banks to take large write-downs in asset values, a position cited by banks earlier this year when they persuaded members of the House Financial Services Committee to demand changes in that rule.
But in an interview Monday, two days before a House committee vote on a proposal that would grant bank regulators the power to sidestep accounting standards, Mr. Volcker said he believed that accounting rules had to be set by an independent agency. He voiced concern that rising political pressures on both sides of the Atlantic were endangering that independence.”
The Financial Services Committee is to vote on amendments to a bill to establish a council of bank regulators as a systemic risk regulator, able to take action if bank activities threaten financial stability. . .
Mr. Volcker was the founding chairman of the International Accounting Standards Committee Foundation, which oversees the International Accounting Standards Board, and has long been a supporter of independent rule-setting. He has been campaigning for a single set of international accounting standards, but he said on Monday that he feared that effort was being undermined.”
Its quite likely that this power will be exercised in the next crisis, removing yet more transparency and data for investors; Worse still, the accounting exemptions will create a new class of zombie banks.
The amendment is strongly supported by the banks. In addition to removing Mark-to-Market accounting, it allows a systemic regulators “to order the Securities and Exchange Commission, which now oversees the Financial Accounting Standards Board, to suspend or change any accounting rule that the council thinks is a threat to financial stability.”
Here’s the most insane quote I’ve seen in a long time:
“The amendment has been endorsed by the American Bankers Association, which says the S.E.C.’s focus, on helping investors, is too narrow. The amendment has been strongly opposed by groups including the Chamber of Commerce and groups representing investors.” (emphasis added)
If this passes, there will be no end to the shenanigans banks can play in the next crisis. As we have sen, many financials insitutions have taken egregious advantage of the crisis they created.
This new reg will be a license to pillage . . .
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Source:
Volcker Criticizes Accounting Proposal
FLOYD NORRIS
NYT, November 17, 2009
http://www.nytimes.com/2009/11/17/business/economy/17volcker.html
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November 19th, 2009 at 7:42 am
Why aren’t we listening more to this font of common sense and logic?
Because he’s Old and In the Way:
http://en.wikipedia.org/wiki/Old_and_in_the_Way
November 19th, 2009 at 7:42 am
Well, Volcker is like me, spent alot of time campaigning for Obie, yet, not a big donor, lol……….so the change I can believe in is only personal……………Libertarians finally get my vote
On a serious note, someone a month or so ago posted up a synopsis of The Fall of The Roman Empire, imho, this is a liscense to mint whatever they damned well please, plain and simple.
November 19th, 2009 at 8:08 am
September 14th, 2009 at 5:58 pm
Inflation and the Fall of the Roman Empire
‘To look at the mentality of the Roman emperors, we can look just at the advice that the Emperor Septimius Severus gave to his two sons, Caracalla and Geta. This is supposed to be his final words to his heirs. He said, “live in harmony; enrich the troops; ignore everyone else.” Now, there is a monetary policy to be marveled at!’
..the ruling elite staying in power at all cost…i think i here something rhyming
http://mises.org/story/3663
November 19th, 2009 at 8:44 am
During the campaign on critical economic issues Obama would ask, “What does Volker think?”
This means that either Obama had a great deal of respect for Paul Volker, or that Volker was used as a foil to convince naive moderates like myself to vote for Obama.
November 19th, 2009 at 8:46 am
@bsneath-
apparently it was that later…and you were not alone
November 19th, 2009 at 8:49 am
oh lordy, my new hope, that we don’t repeat the Barrack Emperors, 26 leaders in 80 or so years, oh me oh my
November 19th, 2009 at 8:58 am
“Et qui me fait régner en effet est mon maître” – Pierre Corneille
He who allows me to rule is in fact my master
He = GS
November 19th, 2009 at 9:24 am
“Mr. Volcker has been an outspoken critic of “mark to market” accounting that forced banks to take large write-downs in asset values, a position cited by banks earlier this year when they persuaded members of the House Financial Services Committee to demand changes in that rule.”
Sounds like that is coming back to bite him in the butt. If you aren’t going to mark to market, the only thing left is marking to whatever fantasy the people in charge come up with.
November 19th, 2009 at 9:55 am
[...] can make the remedy (to bank accounting problems) worse than the disease (short): http://www.ritholtz.com/blog/2009/11/volcker-accounting-panel-needs-to-be-independent/ A follow up comment to this week’s housing starts number [...]
November 19th, 2009 at 10:40 am
“Why aren’t we listening more to this font of common sense and logic?”
Because his opinion hasn’t been paid for or endorsed behind thescenes by the vested interests that keep the lights on in Washington. Volker = J6P with a White House hall pass.
November 19th, 2009 at 10:49 am
bsneath,
try to cut down on the “Evian”, read through some of http://clusty.com/search?input-form=clusty-simple&v%3Asources=webplus&query=Volcker+Trilateral+CFR+Federal+Reserve+Global+Governance
and, for some other inputs..
“…they shout back to the low-income workers clinging to the rails, “Don’t worry! The ship isn’t really sinking. It’s just ‘correcting!’”
The truth is that America IS sinking — and it’s not just the currency I’m talking about here: America’s criminal health care system has sickened the population and outlawed any real healing practices, too. Meanwhile, the FDA and FTC have attempted to destroy all knowledge of natural remedies that can prevent and cure disease, further compromising the future of the American People.
On the dollars-and-cents side, America’s economy is a fictitious mish-mash of corporations selling poisons to the people, and people buying junk they don’t need, and everybody paying through the nose for disease care services that ultimately provide no net benefit to the population.
America’s infrastructure is crumbling, its industries are already gutted, and its exports resemble third-world agricultural nations more than first-world developed nations. Its political leadership is, with very few exceptions, a band of diseased, ignorant influence peddlers who sell out their constituents at every opportunity.
Perhaps more importantly, America has abandoned the principle of law. Laws no longer matter in America because they are selectively enforced only against those who threaten powerful institutions or corporations. America is no longer a nation of freedom and justice for all. Rather, it is a nation of greed and profit for the few, followed by oppression and bankruptcy for everybody else…”
by Mike Adams, the Health Ranger, NaturalNews Editor
http://www.bushstole04.com/monetarysystem/end_closer.htm
November 19th, 2009 at 10:54 am
“to order the Securities and Exchange Commission, which now oversees the Financial Accounting Standards Board, to suspend or change any accounting rule that the council thinks is a threat to financial stability.”
This is somewhat of an oxymoron. If the FASB has accounting rules that could be a “threat” to financial stability, then the problem would appear to reside with the discipline of accounting. How dare those damn accountants create rules that could threaten financial stablity!
I suspect however, that the problem does not lie with accounting nor their rules, but rather that by following sound principles and practices of accounting, the threat to financial stability will become apparant in the risky activities of TBTF entities.
November 19th, 2009 at 10:55 am
If this bill or anything close to it passes then we have to recognize the dire straits we are in until we totally revise our current form of government and its financing.
November 19th, 2009 at 10:57 am
How come there is no resistance from strong and honest companies against these rule changes. I It means there are no honest companies managed by honest management. If this happens, there will be a case for strong de-rating of whole financial sector and even other stocks. They don’t deserve more than 4 PE multiples after these changes.
November 19th, 2009 at 11:01 am
Actually this is like killing a doctor who diagnosed the disease. How come people at top so much irrational.
November 19th, 2009 at 11:23 am
“to order the Securities and Exchange Commission, which now oversees the Financial Accounting Standards Board, to suspend or change any accounting rule that the council thinks is a threat to financial stability.”
No worries then.
The finance/banking sector will rarely invoke this power – using it only when they have royally effed us and the economy and they need an escape clause that allows the companies to keep operating (paying large bonuses and paying bondholders in full) as if they weren’t bankrupt. This will allow the problem to continue growing until the government panics and, on the advice of the finance/banking sector, provides a rapid and total bailout.
Obviously, such a situation is a laughably remote possibility in the U.S.
We should instead be trying to deal with the already present problem of the overregulation which has been stifling innovation in finance. Sure, the minor tweaks in regulations over the past 25+ years have allowed the finance sector to increase its share of U.S. corporate profits from 10% at the start of the Reagan years to 34% in the Bush II years, but, with REAL innovation, the finance sector ought to be able to grab something meaningful – say 80% of U.S. corporate profits.
Then we’d all have to agree with Barry that those hefty bonuses were well earned.
November 19th, 2009 at 11:33 am
Duh! – Let’s see. Conflict of interest (Congress’, SEC, etc. modus operandi – i.e.: do the opposite of what should be done) vs. independence, and objectivity… Which is best? (rhetorical)…
November 19th, 2009 at 3:55 pm
““Why aren’t we listening more to this font of common sense and logic?”
Baudelaire said it best:
“N’étant plus contenu que par le regard de ses dignes compagnons, il se livrèrent aux excès furieux d’une gaité mensongère, fille du libertinage et du rhum.”
Being freed from the inquisitive looks of the upstanding citizens, the rascals delved without contrition unto the excesses of lust and liquor.
Excess and debauch are things common sense and logic particularly abhor and our banksters adore.
November 19th, 2009 at 7:00 pm
Well…well….well!! Who let Paul out to play? He must have snuck-out while Turbo-Tim was testifying before Congress and PO (President Obama) was climbing around on the Great Wall of China.
In regard to changing any of the regulations of GAAP…it’s not really necessary. What we currently have isn’t enforced anyway. Not withstanding Madoff’s confession, nobody has been found guilty of doing anything wrong with our current rules of law.
Can you believe that? What fucking Country do we live in? I can’t believe it. We are sending our taxes to a bunch of thieves. I remember 30 years ago when we used to bad-mouth the earnings and accounting standards of other Countries and we used to just gloat about how much better and honest our reported numbers were. Well, you can forget all that. You couldn’t sell that concept to the biggest idiot living on Mars now. We already know the numbers aren’t worth the paper they are written on and haven’t even looked at the numbers yet! Don’t waste your time on changing FASB, it doesn’t make a shit what the LAW says!!
November 20th, 2009 at 8:02 am
To regulatory forbearance and the TBTF underwriting of the pillaging we must now add truthfulness forbearance.
November 20th, 2009 at 3:00 pm
[...] Ritholz on a potential new amendmentthat will create even more zombie [...]