Accounting Issues “Untouched” by Financial Regulatory Reform Bill

William Isaac, a former Federal Deposit Insurance Corp. chairman and now the chairman of LECG, expressed his objections to the Financial Regulatory Reform Bill now being debated in Congress.  He is quoted in American Banker as saying that, among other omissions, “What’s wrong with these bills is they do not fix the regulatory system that led us into this problem…They don’t deal with the accounting at all. Mark-to-market accounting was a major contributor to this crisis.”

Other critics argue that rules governing banks have actually been softened by the changes in mark-to-market accounting. Banks are now free to “write-up” the values of assets that had few, if any, buyers.

Mr. Issac also notes that the bill does not deal with the Basel capital accords and the procyclical accounting for loan-loss reserves. Nor does the bill institute an independent watchdog to oversee the system.

What’s the rush? Let’s do it right. The economy seems to be getting better. Let’s find a solution that works, rather than one that is easy to pass through Congress now…remember the old saying, “Decide in haste, repent at leisure.”