As one investment bank after another falls prey to the expanding crisis in the credit and mortgage markets, accounting regulators are trying to get a handle on the mess.

The Lehman Brothers bankruptcy and the sale of Merrill Lynch to Bank of America, following on the heels of the government takeover of Fannie Mae and Freddie Mac, have given Wall Street the jitters and sent the Dow plummeting 504.48 points on Monday, only to bounce back 141.51 points on Tuesday. But investors are still worried about some other dominoes in the financial system tumbling, especially insurer AIG, which now has received an $85 billion loan from the federal government.

The Financial Accounting Standards Board has proposed several standards in recent days that may help clarify the accounting for some of the types of assets that have caused trouble in the markets, including credit derivatives and qualified special-purpose entities.

Its international counterpart, the International Accounting Standards Board, has also come out with an update on its response to the credit crisis and a list of projects it is working on to try to clarify the accounting standards to avert further turmoil. These include projects on fair value measurements, consolidation, derecognition and disclosures. Both FASB and the IASB want to get a better handle on the special-purpose entities that so many financial institutions have been using to move dicey investments, especially in mortgage-backed securities, off their balance sheets.

Meanwhile, the presidential candidates have been taking turns blaming one another and their fellow party members for the financial crisis, while mocking the other's tax cut proposals and economic plans. Even tax regulators are attracting increased scrutiny, with the chairman of the tax-writing House Ways and Means Committee, Rep. Charles Rangel, D-N.Y., taking his lumps and agreeing to hire a forensic accountant and work with the House ethics committee to examine his failure to report rental income on his vacation property, along with other matters.

Investors and taxpayers will be watching to see if any of these moves help sort out the still unraveling problems in the financial system. And accountants will have to watch extra carefully to see that the financial statements they prepare adhere to the increased scrutiny that regulators seem to be imposing to an ever greater degree.


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