Washington, DC – Today, U.S. Reps. Frank Lucas (OK-03) and Ed Perlmutter (CO-06), members of the House Financial Services Committee, praised the decision by the Fair Accounting Standards Board (FASB) to give auditors more flexibility in valuing long term assets held by financial institutions. 

FASB’s decision comes in the wake of pressure from Lucas and Perlmutter and other members of the House Financial Services Committee at a recent hearing discussing Perlmutter and Lucas’ HR 1349. The Perlmutter-Lucas bill would provide regulators with discretion in applying accounting standards to take into consideration different types of assets and different types of market conditions.  The discussion surrounding this bill, and questioning of the SEC, prompted FASB to take action today to modify the accounting rules.

“I am very pleased with FASB’s decision to alter the mark-to-market rules and provide more flexibility in valuing assets,” stated Lucas.  This is a first step towards creating sounder accounting practices that will reflect current economic conditions.”

“I’m glad FASB reconsidered their earlier approach.  This is a good step in clarifying how various assets held by financial institutions should be valued.” said Perlmutter.  “We hope these changes made by FASB today will enable financial institutions to get credit flowing to Main Street.”

The changes made by FASB today will allow financial institutions flexibility in valuing some long-term assets with strong cash flows thus providing the banks with more operating capital available to lend to individuals and small businesses.

Perlmutter stated, “Long term, for the safety and soundness of the American financial system, regulators must have the tools to judge the value of assets being held to maturity. Arbitrarily decreasing capital levels of financial institutions puts our communities at risk by causing some financial institutions to show an artificial undercapitalization which prevents them from lending money to businesses and individuals. However, it is critical for investors to have data regarding the assets held by these financial institutions. Our bill, HR 1349, allows for both.”

Lucas stated, “The current instability in our financial system has highlighted the need to provide more appropriate oversight.  HR 1349 works to address this issue and provide a broader economic perspective of accounting practices that impact our financial institutions.  The FAOB will be better able to monitor those practices that pose risk to the health of the system as a whole.”

HR 1349 creates a new oversight board, the Federal Accounting Oversight Board (FAOB) comprised of the Federal Reserve, Treasury, the FDIC, and the SEC, to approve the standards set by the independent Federal Accounting Standards Board (FASB).  This new board fits into responsible regulatory reform because a broader group of individuals with a view of the greater economy should be in charge of applying GAAP.

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