Congress may act to change mark-to-market accounting rules if regulators and standard setters don't, a key congressman warned.
Yet Rep. Paul Kanjorski, D-Pa., chairman of the House Financial Services Committee's Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises, made clear during a Thursday hearing on mark-to-market issues that he did not want to get rid of the practice.
To say that the Congress will have to act is not to advocate an outright suspension of mark-to-market accounting," he said. "If we do away with this standard entirely, accounting will revert to the very kind of subjectivity and sleight-of-hand that made mark-to-market necessary in the first place. The standard does provide transparency for investors, but its strict application in the current environment is, in too many instances, distorting rather than clarifying the picture.
He said that many industries have been hit hard by the mark-to-market rules, especially the financial services sector.
Mr. Kanjorski said that mark-to-market accounting didnt create the current economic crisis and that changing it wont end the crisis. But improving the application of a fundamentally sound principle that is having profound adverse implications in a time of global financial distress is imperative.