Congress Helped Banks Defang Key Rule - WSJ.com - The Diigo Meta page

• 06 Jun 09
  

  Todd Suomela

  accounting regulation regulatory-capture government banking finance crisis law

• 05 Jun 09
  

  Bengt Mettinger

  Fair value

• 04 Jun 09
  

  Irving Markovitz

  globalilzation;derivatives;regulation

• 

  Madison Guy

  banking regulation congress corruption lobbying
• 03 Jun 09
  

  T. Rex Bean

  fasb banks regulation acccounting bailout

• 

  W21st NYC

  N.B. Wall Street government Bailout History Losing? Change rules

  • Marshalling a multimillion-dollar lobbying campaign, these firms persuaded key members of Congress to pressure the accounting industry to change the rule in April. The payoff is likely to be fatter bottom lines in the second quarter.

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      W21st NYC on 2009-06-03

      N.B.
  • The accounting issue lies at the heart of the financial crisis: Are the hardest-to-value securities worth no more than what the market is willing to pay, or did the market grow too dysfunctional to properly set values?

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      W21st NYC on 2009-06-03

      N.B.
  • 7 more annotations...
  • • Backers of the change say it was necessary because existing accounting rules never contemplated the kind of market turmoil that unfolded last year.

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        W21st NYC on 2009-06-03

        A classic case of objectifying an event in order to avoid individual responsibility.
    • Earlier this year, financial-services organizations put their lobbyists on the case. Thirty-one financial firms and trade groups formed a coalition and spent $27.6 million in the first quarter lobbying Washington about the rule and other issues, according to a Wall Street Journal analysis of public filings. They also directed campaign contributions totaling $286,000 to legislators on a key committee, many of whom pushed for the rule change, the filings indicate.
    • Rep. Paul Kanjorski, a Pennsylvania Democrat who heads the House Financial Services subcommittee that pressed for the accounting change, received $18,500 from coalition members in the first quarter, the second-highest total among committee members, according to Federal Election Commission records. Over the past two years, Mr. Kanjorski received $704,000 in contributions from banking and insurance firms, the third-highest total among members of Congress, according to the FEC and the Center for Responsive Politics.
    • The change helped turn around investor sentiment on banks.
    • Financial firms last year reported losses or write-downs totaling roughly $175 billion, according to Michael Mayo, an analyst at the CLSA unit of Credit Agricole SA.

    • Last year, Mr. Hewitt recalls, he challenged ABA lobbyist Donna Fisher and a Wells Fargo executive on their valuation complaints. "If you say you're required to value the securities at 50 cents," he recalls asking, "and you believe that the securities are really worth 80 or 90 cents, do you have a lot of buyers because of this unusually low valuation?"

      
      

      The two responded that there were no buyers, according to Mr. Hewitt.

      
      

      "Then maybe the securities should be valued at less than 50 cents," Mr. Hewitt says he responded.

      
      

      Ms. Fisher declined to comment, as did Wells Fargo. Mr. Hewitt now is a consultant to financial firms.

    • In an interview, Rep. Frank, who got $8,500 from coalition members in late March, said a "wide range of people concerned about the economy, not just banks, were pushing for this."

Public Stiky Notes

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  W21st NYC on 2009-06-03
  N.B.
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  W21st NYC on 2009-06-03
  N.B.
• 
  W21st NYC on 2009-06-03
  A classic case of objectifying an event in order to avoid individual responsibility.

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