Government Loosens Financial Regulations: Market Roars

In short by relaxing the rules they can solve a significant amount of the financial problems. I was talking to someone in the finance industry and he explained it like this. Imagine you are pretty sure you are worth 500,000,000 dollars, but be because of mark to market you appear to be worth only 50 million, how can you possibly sell your assets without collapsing. More importantly how do you fend off vultures who know full well that your assets are worth far more then the 50 million but are letting you twist in the wind so they can essentially get your assets at a steal. But they won't suspend the rule or get rid of it since it was part of the Sarbanes-Oxley, and that is where the politics come in. Of course they could just repeal them, but to do so would be politically impossible. The mantra of the day is de-regulation bad, regulation good. How can they withstand the politics of it if they concede that Sarbanes was an excessive attempt to reform business after the Enron collapse.

WASHINGTON (AP) -- The board that sets U.S. accounting standards on Thursday gave companies more leeway when valuing assets and reporting losses, providing a potential boost to battered banks' balance sheets.

The independent Financial Accounting Standards Board voted to adopt new guidelines under the so-called mark-to-market accounting rules, which require companies to value assets at prices reflecting current market conditions. The board was meeting at its headquarters in Norwalk, Conn.

The changes, which apply to the second quarter that began this month, will allow the assets to be valued at what they would go for in an "orderly" sale, as opposed to a forced or distressed sale.

The new guidelines also will allow banks to avoid reporting some losses on securities by splitting them among factors like fluctuating interest rates that won't have to be counted toward net income or loss.

Two of the five FASB board members, Thomas Linsmeier and Marc Siegel, voted against the change in reporting of such impaired assets. They argued it was the sort of decision bank regulators should make, because it could affect banks' capital positions, and that the FASB had been pressured by Congress to take it.

Financial stocks led a rally on Wall Street after the board voted to relax the rules. The Dow Jones industrial average added more than 250 points to 8,014 in midday trading, the first time it has not risen above 8,000 since Feb. 10. Broader indices also rose more than 3 percent.

In an ironic twist, the new leeway for banks could undercut the government's new financial rescue program in which it is joining with private investors to buy up about $500 billion in toxic assets from banks, some experts say.

NEW YORK (CNNMoney.com) -- Stocks rallied Thursday afternoon after regulators agreed to change a key accounting rule to give banks greater leeway in how they value bad assets.The G-20 meeting of the world's leading economies was also on the radar.The Dow Jones industrial average (INDU) rose 240 points or 3.1%, with 2-1/4 hours left in the session. The Dow had risen as much as 314 points during the afternoon, topping 8,000 for the first time during a session since Feb. 9.

The S&P 500 (SPX) index gained 24 points, or 3%. The Nasdaq composite (COMP) added 50 points, or 3%.Stocks surged Thursday after the Financial Accounting Standards Board (FASB) voted to change the "mark-to-market" accounting rule.

The rule requires banks to value so-called bad debt on their balance sheets based on the fire sales of similar assets at other banks and critics say it exacerbated the financial crisis. Supporters say it is the only way to fairly account for the bad debt. (Full story)

By the way the ap article makes a good point about the Presidents Toxic Asset plan, you have much less need for it if the holders of the toxic assets can give an actual value far above the absurdly low ones they currently have. Update: Up Dow up 216

NEW YORK (CNNMoney.com) -- Stocks rallied Thursday afternoon after regulators changed an accounting rule that critics say exacerbated the financial sector crisis, and by extension, the recession.

The G-20 meeting of the world's leading economies was also on the radar.

The Dow Jones industrial average (INDU) rose 216 points or 2.8%, according to early tallies. The Dow had risen as much as 314 points during the afternoon, topping 8,000 for the first time during a session since Feb. 9.

The S&P 500 (SPX) index gained 23 points, or 2.9%. The Nasdaq composite (COMP) added 51 points, or 3.3%.

Stocks surged Thursday after the Financial Accounting Standards Board (FASB) voted to change the "mark-to-market" accounting rule.