The financial-services industry wants to delay an accounting rule that would force banks and others to bring some of their off-balance-sheet vehicles back into their books next year, which could force some companies to raise additional capital, reports The Wall Street Journal.
The Chamber of Commerce, the Mortgage Bankers Association, and the American Council of Life Insurers and others sent a letter on June 1 to Treasury Secretary Timothy Geithner, regarding the off-balance-sheet accounting-rule change. He believes it should be adopted “cautiously and seek to minimize any chilling effect on our frozen credit markets.”
The letter was signed by 16 industry associations, many a part of the group “Fair Value Coalition.” Some accounting experts are not surprised by the proposed delay. “Here we go again. They will get out their checkbooks and go to the Hill,” says Lynn Turner, the Securities and Exchange Commission’s former chief accountant.
The rule “includes securitization vehicles that played a large role in the bubble and allowed banks to operate with low levels of capital even though they had exposure to these assets that weren’t on the balance sheet,” says accounting analyst Robert Willens.