Senator Jack Reed, D-R.I., has written letters to the heads of the Financial Accounting Standards Board and the International Accounting Standards Board asking how to improve the transparency of the types of assets linked to subprime mortgages.

"Recent events arising from subprime lending, in which estimates of losses now range from $300 to $400 billion, have only served to highlight the need of investors for timely and complete financial information regarding off-balance-sheet transactions and activities," wrote Reed, chairman of the Senate Banking Subcommittee on Securities, Insurance, and Investments, in letters to FASB Chairman Robert Herz and IASB Chairman Sir David Tweedie.

Reed asked what steps could be taken to help investors better understand the effects that securities such as structured investment vehicles, collateralized debt obligations and special purpose entities could have on a company's liquidity and cash flow. FASB hopes to develop a proposal for accounting for these types of debt obligations by the middle of the year.

"After the decline in investor confidence brought on by first Enron and then other corporate scandals, and now the subprime-related issues, further disruption of the markets caused by a lack of transparency and failure to address some of these issues is unacceptable," wrote Reed.

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