Schumer Enlists "Big Four" To Fix Subprime Problem

The politicians are piling on the accountants.

About a month ago, Representative Barney Frank asked the SEC to look into loosening up sale criteria in Statement 140 so that lenders might be less nervous about renegotiating toxic loans. The culmination of his request: it’s not managing a qualified special purpose entity if you’re sure that it’s going to go bust anyway. Don’t worry about wrecking any sale treatment you might have reported beforehand.

Now Senator Chuck Schumer is getting in on the act. According to CFO.com, he’s sent a letter to the CEOs of the Big Four auditing firms, encouraging them to do their part to resolve the subprime crisis by making sure their clients know about the new, improved interpretation of Statement 140 and encouraging them to work with their clients so that they keep housing markets afloat.

Maybe my memory is too long - but didn’t we have a long period of self-flagellation over whether or not auditors were supposed to be independent of their clients, not very long ago? Here, we have a United States senator asking the audit profession to be a stimulus of the economy.

What does the government want from the auditing profession - independent verification of financial reporting to instill investor confidence in markets? Or does it want them to shill for political policies because they happen to be situated at a convenient nexus in the financial reporting machinery? Let’s hope it’s not the latter.