Monday, March 30, 2009

Big Men in Congress Bully Accountants

Congress added on more nail to the coffin of investing by threatening to write national accounting standards. Do you want America's Hall of Shame writing standards for financial practices? Didn't they do enough by repealing Glass-Steagall? Bloomberg reported:

Four days after U.S. lawmakers berated Financial Accounting Standards Board Chairman Robert Herz and threatened to take rulemaking out of his hands, FASB proposed an overhaul of fair-value accounting that may improve profits at banks such as Citigroup Inc. by more than 20 percent.

Take this interchange at a March 12 hearing of a House Financial Services subcommittee:

“You do understand the message that we’re sending?” panel chairman Paul Kanjorski, a Pennsylvania Democrat, asked Herz.

“Yes, I absolutely do, sir,” Herz replied.

After hesitating, Herz said he would try to get a new fair- value rule finished within three weeks.

“The financial institutions and their trade groups have been lobbying heavily,” Herz said in an interview after the hearing. “Investors don’t lobby heavily.”

Maybe investors don't lobby, but they do invest, expecting accurate financial information. Between off balance sheet items and relaxing fair value accounting, accuracy remains in question.

Congress produces poor quality outputs, like their Wall Street counterparts who packaged trillions in junk on the Greed & Leverage Express. Lobbyists mobilize money for Congressional campaigns, a.k.a. political greed. Didn't that get combination get the financial system into trouble in the first place?

It's time for some major breaks from the past. Securitization shouldn't restart, nor should Congress accept kajillions from influence buyers. The last thing our ignorant leaders should do is set standards for any professional group based on lobbyists' needs. Criminey, who thought America would act like a third world country?