Thursday, March 20, 2008
SEC, Investor's Friend? Fiend?
"Just as companies are closing their books on another tumultous quarter, regulators are working on a plan that would let them tell investors that things may not be as lousy as they seem. ... The [SEC] is expected to tell public companies that while they still need to use market prices for many of the instruments they hold no matter how bad those prices look, they can also give investors a wide range of the possible values for those securities. ... 'It probably does give business some discretion and wiggle room,' says James Cox, a securities-law professor at Duke University. ... In January, the SEC's chief accountant took a more-controversial step, saying banks and mortgage companies could modify mortgages without triggering accounting rules that would put the debt onto the company's balance sheet. ... Two weeks ago, during testimony before the Senate banking committee, [Fed] Chairman Ben Bernanke noted his agency's unease over the use of mark-to-market accounting and said it 'is one of the major probelms we have in the current environment.' But he added that there wasn't a clear alternative to the approach", David Reilly and Kara Scannell at the WSJ, 14 March 2008.
The SEC, the investor's "friend", wants to obscure the accounting for various mortgage-related securities value. How nice! See also my 6 February 2008 post. Imagine, accounting may stand in the way of a Fed bailout of the banks.