Who is in Charge?
Bob McTeer suggests that we have turned all authority over to the highly-principled accountants.
look right for them to modify an accounting rule just to save the
financial sector and the economy
In Bob's nightmare, his assets all go to zero and his house is sold, even though he has done nothing. Here is his assessment:
"Speaking of that, I read on the plane that the Federal Reserve,
probably the most conservative institution in America, if not the
world, has been pulling out all the stops-taking unprecedented steps-to
get the country through this national emergency. And I understand the
Treasury has also taken extraordinary, unprecedented steps to save the
economy. Am I right?"
"You are right."
"And I believe there is a provision in the Emergency Powers Act, or
some such law, that gives the President the right to suspend even the
Bill of Rights in a national emergency. Am I right about that too?
"I believe so."
"So the Bill of Rights may be suspended in a national emergency, but not mark to market accounting?"
"It would appear so."
If only those in the Obama Administration would pay some attention, we might end the death spiral and get on the road to recovery.
When we get around to analyzing lines of authority and oversight, eventually someone will ask why we allowed the accountants to rule the world. FASB is not an elected body, and has highly indirect oversight. This should be a prominent feature of hearings on SEC appointments — more important than Madoff.
The accounting mission – informing people about the holdings of public corporations — could be accomplished without destroying the regulatory capital of every financial institution..
Or else we could commit trillions of TARP funds in a never-ending quest. Those looking for a market catalyst need merely to watch for a sign that any public official in power gets this message.