FASB Releases FAS 140, FIN 46R Proposals To Remove QSPEs; FAS 157 and Lehman

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By Edith Orenstein, FEI Financial Reporting Blog - On Sept. 15, FASB issued announced the release of three Exposure Drafts (EDs) that would amend the accounting and related disclosures for transfers of assets including securitizations, and consolidation of certain off-balance sheet entities (commonly called Special Purpose Entities (SPEs), Qualified Special Purpose Entities (QSPEs) and Variable Interest Entities (VIEs).

Upon issuance of FASB’s proposals, the federal banking agencies issued a statement, saying: “The Federal Reserve Board, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, and Office of Thrift Supervision are evaluating the potential impact that these proposals could have on banking organizations' financial statements, regulatory capital, and other regulatory requirements. The agencies expect to engage in discussions with banks, savings associations, and bank holding companies to review and understand fully the implications of the proposed amendments.”

Will Proposed Changes to FAS 140, FIN 46R Impact Appetite to Modify Mortgages?

An interesting question now that the proposed changes to FAS 140 and FIN 46R are out, is whether they will encourage, discourage, or have no effect on the desire of financial institutions and servicers of their loans to modify the terms of mortgages for those at risk of default, particularly subprime mortgages. I will add links to related commentary on this point or feel free to post such links in comments.

Separately, CNBC posted a Guest Blog today (Sept. 15) “Bowyer: Debunking Laissez Faire Lehman,” by Jerry Bowyer, Chief Economist, Benchmark Financial Network, (who began his career with Arthur Andersen), who says Gov. Jon Corzine is wrong, the current economic downturn is not due to laizzez faire regulation. Bowyer critizes post-Enron regulation and says: “It’s not just Sarbox, and Spitzer; it’s stuff like FASB 157, which forces firms to "mark to market" even when the market has collapsed.”

Read more details on the above issues here.

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