Monday, February 9, 2009

Obama Package to Change Mark to Market Rules?

Several news sources have stated that mark-to-market accounting rules for U.S. banks may be changing after this week's release of the Obama administration's plan to dole out the second $350 billion of the $700 billion financial rescue fund.

Banks have been facing steep write downs of troubled assets as a result of the accounting standard. Speculation exists that the charges will preserve the existing standard but allow banks to preserve capital.

Chairman of the Senate Banking Committee Sen. Christopher Dodd spoke to reporters last week that they are considering an approach that modifies but does not abandon the mark-to-market standards.

The SEC has already relaxed standards by allowing banks to reclassify assets that are difficult to value because of lack of market comparable information. The changes preserved value in what otherwise might have been fire-sale values applied to bank assets.

The SEC and the Financial Accounting Standards Board are working on more guidance to help banks determine the value of an asset when there is little or no market trading.

The SEC has not posted any response to the statements.

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