By Emily Chasan
Robert Herz, chairman of the U.S. Financial Accounting Standards Board, said the current accounting rules governing treatment of securitized assets on banks' books are "a fantasy" and need to be redone.
"The original rules made sense, it's just the market practice didn't comply with that," Herz added.
The QSPEs were thought to be sufficiently out of control of the banks that they did not have to be booked on their balance sheets. But Herz said that principle was not strictly followed.
"It's a fantasy given today's structures," Herz said. "It was constructed to be a narrow, very passive, almost brain-dead vehicle."
Herz compared the revision to other FASB projects where companies did not want to expense stock options, or preferred not to account for pension obligations as liabilities on their balance sheets.
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