WASHINGTON - In response to comments made by Treasury Secretary Henry Paulson during a speech he delivered on November 20, the American Bankers Association wrote a letter today to Secretary Paulson recommending several steps that should be immediately taken in order to avoid unnecessary hits to financial institutions’ capital.
Speaking at the Reagan Library in Simi Valley, Calif., Secretary Paulson said that it was important to address the aspects of our financial system that reinforce rather than counterbalance cycles. He also stated that “mark-to-market accounting is clearly pro-cyclical.”
In the letter to Paulson, ABA president and CEO, Edward L. Yingling strongly agreed with Paulson’s assessment of mark-to-market accounting, stating that the past year “has demonstrated that the consequences of these pro-cyclical accounting standards are grave.”
Yingling further noted that because banks will be required to file their year-end financial statements in a few weeks, the time to address the failures of current accounting policy is now, as delay threatens to undo much of the work of Treasury’s Capital Purchase Program.
“While the government makes millions of dollars available to increase capital, other policies simultaneously are needlessly, and wrongly, erasing billions of dollars of banks capital,” said Yingling.”
cont'd
http://www.aba.com/Press+Room/112508ImmediateActionMarktoMarket.htm
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