(WASHINGTON) A senior US lawmaker has urged securities regulators to put off an accounting change that could force banks to put trillions of dollars back on their balance sheets.
'Changes to securitisation accounting could have a dramatic impact on the economy, the capital markets and consumers seeking credit,' Spencer Bachus said in a letter to the chairmen of the US Securities and Exchange Commission (SEC) and the Financial Accounting Standards Board (FASB).
Mr Bachus said that Jan 1, 2010 would be a more realistic deadline than this year for implementing accounting changes as it would allow 'stakeholders' to have the time to debate alternatives and consequences.
FASB is working on a proposal to eliminate certain off-balance sheet items called qualified special purpose entities (QSPEs) that are used to pool debt such as mortgages and student loans.
FASB plans to issue the proposal in August despite concerns that banks and others like Freddie Mac and Fannie Mae would have to raise billions in capital at a time of tight credit.
'Significant changes to the accounting rules should be made with careful consideration and preferably when markets are functioning with minimal stress and volatility,' said Mr Bachus, the top Republican on the House Financial Services panel, which oversees the SEC.
The letter said that based on Dec 31 figures, about US$7.2 trillion in mortgage-backed securities, US$2.47 trillion in other asset-backed securities and US$816.3 billion in asset-backed commercial paper could be affected.
The SEC has directed FASB to provide clear guidance on the accounting rule by the end of 2008.
FASB is also considering requiring banks to disclose information about their exposure to mortgage-backed securities and off-balance sheet items.
The real estate industry welcomed the letter. 'We're hearing from policymakers and markets participants that this is simply the wrong medicine at the wrong time,' said Brendan Reilly, senior vice-president with the Commercial Mortgage Securities Association. -- Reuters
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