Now it appears the legislation expected to be voted on by the House as soon as Monday contains a victory for common sense: section 132 of the bill would give the Securities and Exchange Commission authority to suspend mark-to-market accounting rules. (See page 88 of PDF
here.)
The Competitive Enterprise Institute’s John Berlau
believes that “relatively simple changes to mark-to-market rules, like suspending the rules for illiquid but performing loans if a firm meets other solvency requirements, would lead to more accurate information and could quell demands for more ‘emergency’ bailouts.” Berlau is director of the Center for Entrepreneurship at CEI.
Mark-to-market accounting rules have helped to exacerbate the financial crisis by, in effect, creating the illusion that things are much worse than they really are. Whether the SEC, led by chairman Chris Cox, will actually suspend the rule and how such a suspension would actually work is anyone’s guess.
(See previous posts on the bailout
here,
here,
here,
here, and
here.)
