March 11, 2009

Today, U.S. Reps. Ed Perlmutter (D-CO) and Rep. Al Green (D-TX), members of the House Financial Services Committee, sent a letter to SEC Chairwoman Mary Shapiro urging her to conduct a study of accounting rule FAS 157 and urging her to consider possible alternatives.

This letter follows the introduction of the Perlmutter-Lucas HR 1349 which would create a new Federal Accounting Oversight Board to oversee the application of Generally Accepted Accounting Principles (GAAP) to the financial markets.

The Perlmutter – Green letter urges Chairwoman Schapiro to consider whether companies’ financial statements should be supplemented with an addendum describing how the reported values result from the implementation of this methodology. Finally, the letter emphasizes the need to develop clear, consistent and transparent standards that derive from a process that takes into consideration the views of regulators, consumers and industry officials.

“As we work to stabilize financial markets and rebuild the economy, we must look closely at the regulatory structure to see what is helping and what is making things worse,” said Perlmutter. “Any changes must provide the accountability and transparency necessary for investors to assess their investments in financial institutions, but we should strive to provide regulators with the flexibility they need to work with financial institutions to keep credit flowing to Main Street.”

Green stated, “Mark-to-market is a rule that we should not end, but must amend. The adverse impact in these circumstances exceeds the rule’s positive effects, particularly since some products are going to be held until maturity. For these instruments, the most important time to assess their value will be at maturity as opposed to at random moments in time.”

Mark to Market, an accounting principle under steady criticism, will be the subject of a Capital Markets, Insurance, and Government Sponsored Enterprises Subcommittee hearing in the House Financial Services Committee on Thursday, March 12.

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