It’s the BASEL endorsement and encouragement of the holding of sovereign bonds as “ risk-free” that have lead to a lot of the pain in Europe. BASEL increased the holdings of risk-free sovereigns in the banks.

The SEC’s decision to delay the potential ruling is prudent and appropriate.

[$$] SEC Delays Call on Accounting Rules – The Wall Street Journal, December 6, 2011

You can burn a lot of calories wondering why the FASB didn’t leave well enough alone.

After a virtual banking collapse, in April of this year the FASB re-suspended the rules. And surprise, banks are suddenly in better shape. What’s more, it didn’t cost any one a dime, taxpayers have probably saved billions in bailout funds, and there is widespread optimism that the economy is turning around.

And oh yeah. The investments the FASB wanted downgraded by mark-to-market?  Using the same mark-to-market rules, they’re worth more, too.

So why does the FASB now want to go back yet again to an archaic rule that exacerbated the Great Depression and clearly made the Great Recession far worse than necessary?

We can only speculate. But it’s clear that more than a few FASB members are miffed that they look like they caved to political pressure. I agree that having Barney Frank and Paul Kanjorski in your kitchen isn’t fun, but do you really want to see banks and the economy crumble again?