Will this man ever take responsibility for what he does?
Many second liens have little value because of the plunge in home prices, Rep. Frank wrote, adding: "Yet because accounting rules allow holders of these seconds to carry the loans at artificially high values, many refuse to acknowledge the losses and write down the loans."
How did that happen Mr. Frank?
Oh yeah, I remember! Your committee pressured FASB to drop "mark to market" accounting requirements last year!
That is, YOU were personally responsible for this crap.
Remember the subcommittee hearing chaired by your fool-in-chief Mr. Kanjorski? I remember that circus show of horrors well. In case you've forgotten, let me help jog your memory:
Washington, DC – Congressman Paul E. Kanjorski (D-PA), Chairman of the House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises, today announced that the Subcommittee will hold a hearing to examine the mark-to-market accounting rules that many contend have exacerbated the current troubles in the financial industry and in the broader economy. The standard requires companies to value assets they hold at current market values. For assets that are frozen and have a diminished current market value but may recover value in the future, the standard has proven problematic. Companies are then forced to write-down billions in assets, which can lead to further write-downs elsewhere.
Like second mortgages, for instance?
Yeah.
This hearing was what prompted those banks to mark those loans to fantasy values, a practice they are still continuing to this day, even though if the first is underwater and goes into foreclosure the second is in fact worth zero.
Therefore, a first that is both underwater and is late by 60 days or more is almost certain to either short sale or foreclose ultimately, and under mark to market rules the second would have to be written off.
But your committee, which sits over the subcommittee on Capital Markets, effectively bludgeoned FASB into legalizing the accounting fictions that you now complain about.
Indeed, the testimony of FASB was that:
The fact that fair value measures have been difficult to determine for some illiquid instruments is not a cause of current problems, but rather a symptom of the many problems that have contributed to the global crisis, including lax and fraudulent lending, excess leverage, the creation of complex and risky investments through securitization and derivatives, the global distribution of such investments across rapidly growing unregulated and opaque markets that lack a proper infrastructure for clearing mechanisms and price discovery, faulty ratings, and the absence of appropriate risk management and valuation processes at many financial institutions.
None of which, I might add, your Committee has bothered to address.
Having done nothing but bleat and ram down the throat of FASB changes in accounting standards that have legalized outright balance sheet fraud, you now have the temerity to complain about the results, when I and many others said at the time this would be precisely what would happen.
The solution to the problem is, of course, to reverse the outcome of that idiotic hearing and restore mark-to-market accounting forthwith for all bank assets.
Go look in the mirror Mr. Frank - you made this mess yourself, and while you're at it drag that clown-car occupant Kanjorski with you.
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