Wednesday, August 29, 2007

Weiling About Modifications, Again

by Tanta on 8/29/2007 11:02:00 AM

Bloomberg's Jonathan Weil is a menace to society.

Last time I bothered to read any of his hysterical Emily Latella-style ravings on the subject, he was completely missing the point about the accounting rules involved in the "modification problem," but making up for his ignorance in inflammatory rhetoric.

He's at it again.

Aug. 29 (Bloomberg) -- It's bad enough when a company's outside auditor is a pushover for management. Equally galling would be for the auditor to try telling management how to run the company. Yet that's what U.S. Senator Charles Schumer has asked the Big Four accounting firms to do at the subprime lenders they audit, pronto.

``One of the most promising solutions to the anticipated foreclosure crisis is the voluntary modification by lenders of existing unsustainable subprime loans,'' Schumer, a New York Democrat, said in an Aug. 23 letter to the firms' top executives.

The chairman of Congress's Joint Economic Committee then called on the firms to ``assist this country's mortgage crisis'' and ``urge your clients to do their part to keep our housing markets afloat, by modifying subprime loans that are at risk of default.''

In so doing, Subprime Chuck made a blithering fool of himself, though he probably doesn't realize why.
Schumer, just like the SEC, is telling auditors that they should stop telling their clients that accounting rules forbid modifications of defaulting and soon-to-default loans in securitizations, because the SEC and FASB have determined that this does not violate accounting rules.

Weil then spends much ink assuming that we're talking about lenders' balance sheet loans, and waxing horrified over the idea that an accounting firm might give advice about accounting rules. It all ends up involving apple pie, somehow.

I have no idea why Weil is so spastic on the subject of accounting rules. Maybe he had a mean accounting teacher in the fourth grade who scarred him for life. But of all the criticisms of Schumer I've heard recently, I must say this is the most clearly lunatic.