Washington/New York - In an effort to relieve pressure on the banking industry's hard-pressed bottom line, the Securities and Exchange Commission (SEC) has relaxed reporting requirements for the value of investment assets on the books of financial firms. The move by the SEC on Tuesday was one of the regulatory tools being deployed by the nation's economic gurus to help relieve the country's financial crisis while Congress continues to debate a massive intervention in capital markets to thaw out the deepening credit freeze.
In the ruling, banks were given greater leeway in deciding the value of the investments on their books, even if market data indicates lower prices are in order, because of the current turmoil in the markets.
Congressmen, banking lobbyists and companies have been urging the SEC to suspend fair-value accounting, as the current procedure is called, saying it forces firms to report losses they never expect to incur on investments they do not plan to sell in the near-term.
But Federal Reserve Chairman Ben Bernanke and others say totally removing the rule would erode confidence that firms are owning up to losses.
The ruling comes as financial institutions have written down more than 550 billion dollars worldwide since August 2007, mostly on mortgage loans gone sour amidst the worst financial crisis to face the US and the world since the Great Depression of the 1930s.
Many of the high-risk securities based on bad mortgage loans are weighing down the bottom line of financial firms, further eroding trust in all-important inter-bank loans and confidence among investors.
The value of the toxic securities is difficult to determine amidst the current market turmoil.
But under standing SEC rules, banks had been required to estimate their low current value, even if they were intending to hold on to the assets for a long time.
The SEC ruled Tuesday that "the results of disorderly transactions are not determinative when measuring fair value" because "the concept of a fair value measurement assumes an orderly transaction between market participants."
It said that assessing the value of such assets "often requires significant judgment," giving the banks more latitude in determining their v
