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NEWS RELEASE
Nov. 25, 2008
ABA Media Contact: Peter Garuccio
(202) 663-5452
E-mail: pgarucci@aba.com
ABA ASKS TREASURY FOR IMMEDIATE ACTION ON MARK-TO-MARKET ACCOUNTING ISSUES
WASHINGTON - In response to comments made by Treasury Secretary Henry Paulson during a speech he delivered on November 20, the American Bankers Association wrote a letter today to Secretary Paulson recommending several steps that should be immediately taken in order to avoid unnecessary hits to financial institutions’ capital.
Speaking at the Reagan Library in Simi Valley, Calif., Secretary Paulson said that it was important to address the aspects of our financial system that reinforce rather than counterbalance cycles. He also stated that “mark-to-market accounting is clearly pro-cyclical.”
In the letter to Paulson, ABA president and CEO, Edward L. Yingling strongly agreed with Paulson’s assessment of mark-to-market accounting, stating that the past year “has demonstrated that the consequences of these pro-cyclical accounting standards are grave.”
Yingling further noted that because banks will be required to file their year-end financial statements in a few weeks, the time to address the failures of current accounting policy is now, as delay threatens to undo much of the work of Treasury’s Capital Purchase Program.
“While the government makes millions of dollars available to increase capital, other policies simultaneously are needlessly, and wrongly, erasing billions of dollars of banks capital,” said Yingling.”
Yingling suggests three things that the Securities Exchange Commission can do in the near term to help alleviate concerns:
(1) Clarify that the accounting rules for other than temporary impairment are based on credit impairment;
(2) Clarify that the definition of fair value is based on willing buyer/willing seller rather than exit price; and
(3) Delay the implementation date for the new business combinations rules, which affect mergers and acquisitions.
The letter was simultaneously sent to the SEC, the Federal Reserve, incoming Treasury Secretary Timothy Geithner, and Democrat and Republican leaders of the House Financial Services Committee and the Senate Banking Committee.
Click here to view a copy of the full letter.
The American Bankers Association brings together banks of all sizes and charters into one association. ABA works to enhance the competitiveness of the nation's banking industry and strengthen America’s economy and communities. Its members – the majority of which are banks with less than $125 million in assets – represent over 95 percent of the industry’s $13.3 trillion in assets and employ over 2 million men and women.
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