Saturday, July 05, 2008

Foreign Rule

Federal officials say they are preparing to propose a series of regulatory changes to enhance American competitiveness overseas, attract foreign investment and give American investors a broader selection of foreign stocks.

But critics say the changes appear to be a last-ditch push by appointees of President Bush to dilute securities rules passed after the collapse of Enron and other large companies — measures that were meant to forestall accounting gimmicks and corrupt practices that led to those corporate failures.

Legal experts, some regulators and Democratic lawmakers are concerned that the changes would put American investors at the mercy of overseas regulators who enforce weaker rules and may treat investment losses as a low priority.

Foreign regulators are beyond the reach of Congress, which oversees American securities regulation through confirmation proceedings, enforcement hearings and approval of the Securities and Exchange Commission’s budget.

The commission is preparing a timetable that will permit American companies to shift to the international rules, which are set by a foreign organization and give companies greater latitude in reporting earnings. Companies that have used both domestic and overseas rules have, on average, been able to report revenues and earnings that were 6 percent to 8 percent higher under the international standards, according to accounting experts.

Though foreign accounting standards are stronger in some ways than American accounting principles, they are weaker in some important areas. They enable companies, for example, to provide fewer details about mortgage-backed securities, derivatives and other financial instruments at the center of today’s housing crisis and that have troubled many Wall Street firms, including Bear Stearns.
This is the most innocuous of all possible tellings of how the table is being set for additional, massive flight of capital flight from the ravaged carcass of the U.S. economy. Combined with the IMF audit of the Fed, to me, this looks like the writing on the wall that says there will be no imminent outbreak of WW-III bankruptcy and reorganization for the benefit of the U.S.. We will instead - I suspect - be left to our own pathetically attenuated devices. Read it and see what you think. Accounting Plan Would Allow Use of Foreign Rules