Congress Gift to Banks: Transforming Losses into Profits

This month marks the first anniversary of Congress putting undue pressure on the Financial Accounting Standards Board (FASB) to gift banks with the ability to transform losses into profits by replacingmark-to-market accounting with mark-it-so-I-get-a-bonus accounting. 

It's no coincidence that it's also the one-year anniversary of the bear-market low - from which emerged the near-record-setting stock-market rally that sent U.S. share prices on a 70% rocket ride.

The future of the stock-market rally and of America's position as the world leader in financial services and capital-markets innovation is wholly dependent on having a healthy banking sector. We have a window of opportunity to undo some of the desperate - but sometimes necessary - measures that were put in place to save the U.S. financial system from a complete collapse.

So if this market rally signals that the worst of the crisis is over, thanks to a liquidity-filled punch bowl being fed by a government spigot, and if banks are making so much money, literally in the tens of billions of dollars, why don't we use this "window" to really clean up the U.S. banking system? Why don't we close banks that aren't solvent, break up all the too-big-to-fail banks, and set the stage for a long-term economic rally and a revitalization of the world's faith in the American brand of global capitalism? 

We should take these steps. Indeed, some brave souls already are trying to move us in this direction. But other forces are undermining necessary bank-reform efforts and obscuring the transparency needed to determine the true value of the types of securities that drove us into the credit crisis and the Great Recession.