Banks v. Oil Companies

"Accounting-rule makers moved to launch an effort that could lead to an expansion of mark-to-market accounting, a practice many banks say has worsened the financial crisis. The Financial Accounting Standards Board on Monday told its staff to begin work on a project, or the first step in the standards-setting process, to re-examine accounting for financial instruments. Under one scenario likely to be examined, the use of mark-to-market accounting might be extended to a wider variety of securities, with FASB taking a more holistic view of accounting for loans, bonds, derivatives and stocks. ... Critics say the approach ignores long-term values, while ensuring losses deplete bank capital when they need it most", David Reilly at the WSJ, 16 December 2008.

"Tumbling energy prices already have hurt oil companies' revenue. Now they are threatening companies' untapped oil and natural-gas reserves, a key measure of a company's value. Many companies will likely be forced to declare that big chunks of their oil and gas reserves are unconomic. That could have wide-ranging implications for oil companies, which need to show increasing reserves to attract investors and, in some cases, to serve as collateral on loans. ... Under securities rules, they can only include oil that can be produced economically--a calculation based on oil and gas prices at the end of their year, usually Dec. 31", Ben Casselman at the WSJ, 16 December 2008.

"Shoot the messenger. For months, that has been the mantra of some bankers who say mark-to-market accounting has made the financial crisis far worse. ... Indeed, as FASB member Thomas Linsmeier noted during this week's board's meeting, of 17 banks seized this year by the [FDIC], just 10% of their average total assets were marked to market prices. These banks were failing for reasons other than mark-to-market accounting, namely bad lending. ... But the accountants shouldn't shy away too much from battles, even if it brings politicians into the fray. Legislators on both sides of the Atlantic have begun trying to politicize accounting during the crisis", David Reilly at the WSJ, 19 December 2008.

If banks think accounting entries "deplete" their capital, they haven't a clue what their business is about.

Do banks think oil companies should base their reserve calculations on "long-term oil prices"?

Will the Big 87654 tell Congress, "Get lost"? If not, who needs them?