Cuando las ilusiones fallan, los banqueros atacan la realidad
March 3, 2008 (LPAC)--Bankers are, by and large, an entirely predictable lot who prefer their delusions of solvency to the reality of bankruptcy, so it should come as no surprise to see that some are now pushing the line that overly restrictive accounting rules are overstating the problems in the financial system. This claim has, naturally, struck a responsive chord at the Wall Street Urinal, which devoted a front-page article to their whining on March 1. According to the Urinal's David Reilly, some financial executives and investors "are blaming accounting rules for exaggerating the losses and are seeking new, more forgiving ways to value investments.... Some analysts and executives argue this triggers a domino effect. The market falls, forcing banks to take write-offs, pushing the market lower, causing more write-offs." These investors "argue that the market has overreacted and will recover once the current panic subsides." After all, they argue, they have no intention of selling at current prices, and will wait until the market recovers.
The problems with this rosy view are several, beginning with fact that the financial system has died, and the falling asset valuations are the inevitable result of that collapse. This is not a cyclical crisis in which things will get better if we just close our eyes and wait. Furthermore, it is precisely the kind of slutty accounting tricks the bankers are proposing that allowed us to get into this mess in the first place; they have pretended for a long time that their pile of unpayable debts was actually a mighty mountain of assets, but the time has come to pay the piper. Rather than admit reality, the bankers would much rather continue their game of pretend. Reality, however, is not so easily ignored.
Even the Financial Accounting Standards Board, the body which sets the accounting rules, realizes that approach can't continue. "Is just pretending that things aren't decreasing in value a better answer?" FASB Chairman Robert Herz asked the Urinal. "Should you just let everybody say they think it's going to recover?"
