Excerpt from Viewpoint: Accounting Rules Making Things Worse?
by Edward L. Yingling, Chief Executive Officer of the American Bankers Association
There are certainly many factors causing the freeze-up in our financial markets. However, it is time to debate whether accounting policies are making the problem worse than it should be.
Are they adding fuel to the fire, rather than accurately measuring its heat? Are they, in fact, helping to build a feedback loop that causes a downward spiral?
Assets are being marked to market, but what is the right definition of the market, particularly when it is clearly dysfunctional? Many people believe that in some cases the assets behind the securities — mortgages, for example — are worth more than the mark-to-market valuations of the securities.
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