Amid Subprime Disaster, Accounting Rules Remain Unchanged
US Accounting code, long considered dated by the international community, has remained unchanged despite the total disaster which it helped create during the recent subprime lending craze. Reuters is reporting:
”The regulator’s tools for the most part are disclosure,” Roel Campos, former U.S. Securities and Exchange Commissioner (SEC), said at the International Federation of Accountants’ World Accountancy Forum in New York on Tuesday.
“I don’t know that it is appropriate to expect regulation, regulators, and standard setters to essentially prevent the next restructuring or subprime mortgages,” he said in response to a question from Financial Accounting Standards Board Chairman Robert Herz.
“Maybe there is a different way of thinking about the risks in the system and how to govern the financial system,” Herz told the forum. “I don’t know where the balance is, but we’re somehow not getting it right.”
Loose lending standards, rising interest rates in 2005 and 2006, and falling house prices led to an increase in the number of less-credit-worthy U.S. borrowers and contributed to a U.S. housing market slump.
While it’s gotten much harder to qualify for loans like a Utah Second Mortgage, lenders have escaped regulation (and punishment) for the reckless lending they did in recent years.
Comments
Leave a Reply
You must be logged in to post a comment.