Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, reassured attendees at the American Accounting Associations Annual Meeting that he had no intention of legislating accounting standards.
Asked about a congressional hearing he attended in March in which Financial Accounting Standards Board chairman Robert Herz was told that he needed to revise mark-to-market and fair value accounting standards in three weeks time, Frank said the subcommittee was only exerting pressure, but not trying to legislate standards.
At that same subcommittee hearing I announced that as long as I was chairman of the committee, we would never consider any legislation to mandate changes in accounting, he said. Ive taken that position consistently. He noted that he had some concerns about mark-to-market and fair value accounting and wanted the standards changed, but as chairman of the committee, he said he had the power to stop other lawmakers from making legislative changes to accounting standards by setting the agenda.
We will never legislate accounting while Im chairman, said Frank. Thats not going to be forever, he quickly added.
Another member of Franks committee, John Campbell, R-Calif., agreed that Congress should not be legislating accounting standards. We do not want to be politicizing accounting standards, he said. That will be a disaster. Exactly as Barney mentioned, we have influences, and if accounting standards are going to be politicized, smaller community banks would have a different set of accounting rules than would large banks. All sorts of things can get involved when you politicize accounting, so the last thing in the world I want to see is us making accounting rules because we will make them for the wrong reasons.
Campbell said he only wants Congress to oversee the process by which accounting rules are made. He noted that he has a lot of issues with International Financial Reporting Standards, but he believes that accounting has become too rules based. Campbell said he keeps an "immense" reference book in his office that covers the FAS 123 rules on stock options and that accounting ought to be more principles-based.
You put everything in a rule so you dont get sued, said Campbell. If I meet the rule, I dont get sued. Other countries, because they have a different litigation setup, are more principles based.
An audience member asked Frank if he thought the major auditing firms should be investigated for overvaluing the assets of failed banks and financial companies, but Frank said that his committee is trying to look forward. He blamed the securitization of loans as the main culprit behind the overvaluation of assets such as subprime mortgages. Campbell agreed, saying, "Its not an auditors job to evaluate the value of a house."
Frank also talked about the proposed creation of a Consumer Financial Protection Agency, and he noted that the agency is not likely to do much regulation of tax preparers. I do not contemplate that tax preparation will be supervised by the consumer entity, he said. He added that refund anticipation loans could be covered by truth-in-lending legislation, but emphasized, I do not believe there is any significant likelihood of tax preparation being put in there. Frank did not address the IRSs plans to increase regulation of tax preparers, however.
Frank noted that many of the Obama administrations proposals for the Consumer Financial Protection Agency are not likely to end up in the final bill, such as provisions calling for plain vanilla mortgages and pre-approval of financial service products.