The SEC is coming out firmly against a proposed amendment that would create an oversight council of bank regulators that would have the ability to rewrite accounting standards.

The amendment, proposed by Rep. Ed Perlmutter, D-Colo., would give the new council the ability to recommend that the SEC direct the Financial Accounting Standards Board to suspend, modify or eliminate any accounting principle, standard or procedure that threatens the stability of the U.S. financial system. Perlmutter is proposing the amendment as part of the Financial Stability Improvement Act of 2009, which the House Financial Services Committee is marking up this week, as part of an effort to create a systemic risk regulator for the financial system.

At a Financial Executives International conference in New York, SEC Chief Accountant Jim Kroeker reiterated SEC Chair Mary Schapiro’s opposition to the proposed amendment. “This is another area where I think we’ve been fairly clear as an agency,” he said. “The chairman sent another letter to the chairman of the House Financial Services Committee on the importance of independent accounting standards, with a fairly clear view that accounting ought to be for accounting’s sake. That is, reporting ought to be accurate. It isn’t a tool that should be used for somehow trying to mitigate systemic risk or otherwise. You have to do the best you can portraying the economics of an event. Accounting standards shouldn’t be changed in economic down times to somehow make the economics different. It shouldn’t be a surrogate for macro prudential regulation.”

SEC commissioner Elysse Walter also expressed her opposition to the proposal at a congressional hearing, calling it “a grave mistake,” according to In addition, former Federal Reserve Chairman Paul Volcker told Floyd Norris of The New York Times that he thinks the amendment is "a terrible idea."

AICPA president and CEO Barry Melancon and Center for Audit Quality executive director Cindy Fornelli have spoken out against the amendment (see AICPA, CAQ: Banking Regulators Should Not Set Standards). The CAQ recently wrote a letter, in conjunction with the Council of Institutional Investors and the U.S. Chamber of Commerce, to the House Financial Services Committee expressing their opposition (see CAQ Wants Congress to Preserve SEC Oversight of FASB).

Accounting lobbyists who are working on the issue say they have heard secondhand that Perlmutter does not have the votes for the amendment and may withdraw it. We’ll have to see how the bill progresses this week to find out if that is true, however. Banking interests are pressing to have the amendment included in the bill.