FASB Chair Herz Forcibly Fed the Kool-Aid, Says Banks Deserve a Break on GAAP
Well WTF, why do we even have rules? Let's forget about revenue recognition, revenues can now be recognized when they are earned and realizable or totally imagined and never realizable. Screw it.
Robert Herz, chairman of the Financial Accounting Standards Board, wants to loosen the ties between accounting standards and banks' capital thresholds.
At the American Institute of Certified Public Accountants's annual meeting Tuesday, Herz called for a "greater decoupling of bank regulation from U.S. GAAP reporting requirements," according to his prepared speech. He has previously voiced his support for the concept.
Herz noted that while bank regulators use financial statements based on U.S. generally accepted accounting principles as a reference point for determining a financial institution's capital needs, the standards "do not dictate regulatory requirements."
To be sure, Herz is trying to quell any misconceptions about how deep the connection is between accounting rules and bank regulatory requirements. Such "confusion" (his word) has resulted in U.S. and international standard-setters feeling the heat from politicians and bank lobbyists since the credit markets began to crumble two years ago.
Most likely, the chairman would prefer to keep accounting rulemaking and banking regulation separate — in the minds of observers, as well as in practice — to repair FASB's independence, which has been tampered with in the past several months as bank lobbyists and lawmakers pressured the board and its international counterpart to ease fair-value accounting rules. The separation would put the onus on banking regulators to make changes in how they determine financial institutions' baseline capital needs.
Herz acknowledged that investors' and regulators' needs differ when it comes to the merits of the concept of measuring financial instruments according to current market values. Cost accounting may be more useful for regulators, he noted, for valuations of some assets in determining capital requirements. However, he added, "in instances in which the needs of regulators deviate from the informational requirements of investors, the reporting to investors should not be subordinated to the needs of regulators."
Bob Herz doesn't realize it but he just slaughtered capitalism's last chance and then took a long hard piss on its carcass FTW.