Mark-to-market accounting is due to get a public hearing in March, Rep. Paul E. Kanjorski (D-Penn.) announced Thursday. The accounting practice requires banks to value assets at current market prices, rather than by historical purchase price, and has resulted in dramatic write-downs on bank balance sheets as markets have frozen or plummeted.
"Illiquid markets have resulted in great difficulty in valuing sizable assets. Some have therefore complained about fair value accounting and sought to eliminate it. While companies need stability, investors still need accurate information," said Kanjorski. The hearing will be March 12th.
Bankers argue that requiring them to use current market prices isn't fair because the banks don't intend to sell those assets until the market rebounds. But then what price is appropriate?
Kanjorski said that Congress "cannot allow for fantasy accounting that wishes away bad assets by merely concealing them." Kanjorski is chairman of the House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises.
Rep. Barney Frank (D-Mass.), asked about mark-to-market accounting in February, said that he doesn't believe it should be abolished but also doesn't believe that Congress should be in the business of regulating specific accounting standards.
"I want to find a way -- within the existing independent standard-setting structure -- to still provide investors with the information needed to make effective decisions without continuing to impose undue burdens on financial institutions," said Kanjorski. "Each of our anticipated witnesses will have the opportunity to contribute as we all pursue consensus solutions together to this thorny, contentious issue."