- The Washington Times - Tuesday, December 9, 2008

The government’s top securities regulator said Monday that accounting rules shouldn’t be bent to help soothe the battered economy.

Accounting rules must be neutral and “aren’t just another financial rudder to be pulled when the economic ship drifts in the wrong direction,” said Securities and Exchange Commission Chairman Christopher Cox. “Instead, they are the rivets in the hull, and you risk the integrity of the entire economy by removing them.”

Still, Mr. Cox indicated that constructive revisions could be made to improve a rule that the banking industry wants be suspended in the crisis.

The industry has asked the SEC to suspend so-called “mark-to-market” rules that require banks to value the assets on their balance sheets at current market prices even if they plan to hold them for years.

Mr. Cox’s remarks to an accounting industry audience signaled that the agency is unlikely to suspend the rules, but he said refinements appear to be in order. A study by the SEC has found most investors agree the rules that provide a meaningful way to measure assets.

Mr. Cox acknowledged the extraordinary nature of the credit and financial crises that have plunged economies around the globe into distress, but said, “The more serious the stresses on the market, the more important it is to maintain investor confidence” with neutral, independent accounting standards.

Separately, the SEC announced its approval of measures designed to make the market for municipal bonds more transparent for investors. For the first time, investors will have a free, one-stop way to find municipal-bond information online to help them make investment decisions, the agency said.

Under the change, the electronic municipal market access system operated by the Municipal Securities Rulemaking Board will be available to investors on the Internet.

The SEC study on the accounting rule, to be issued by Jan. 2, was mandated by Congress as part of the $700 billion financial bailout package enacted in early October. The law also affirms the SEC’s authority to suspend mark-to-market accounting - a change won by the industry’s Republican allies in Congress.

The study includes an examination of the rule’s effect on bank failures this year. There have been 23 bank failures this year through Friday, up from three in 2007.

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