Rep. Paul Ryan (WI), the senior Republican on the House Budget Committee, appeared on MSNBC’s “Morning Joe” today to address the mounting criticism of his party as lacking an alternative approach to the financial crisis.
After host Joe Scarborough noted that MSNBC analyst Mike Barnicle’s wife works for Bank of America — and jokingly asked the congressman to “wind them down … more slowly than other banks” — Barnicle asked Ryan whether minimum capital requirements for banks should be lowered beyond their existing levels.
In response, the GOP congressman acknowledged that capital requirements have been “too liberal” during the past decade, echoing the warnings of economists who have criticized global regulators for overly relaxing the level of capital that banks are permitted to hold.
But what does Ryan think is the best way to bounce back from overly liberal capital requirements? Imposing more liberal accounting rules by suspending mark-to-market accounting practices that require rational valuation of toxic assets. The congressman’s full remarks are after the jump.
When you have mark-to-market accounting in a downward economy, in a spiraling balance sheet economy, that means those reserves have to grow, that means you can’t lend as much.
So we need to fix the mark-to-market rules, either suspend them, go to a six- or a one-year rolling average. It’s these mark-to-market rules that are taking these balance seats of these banks downward and preventing them from lending.
So rather than changing the capital requirements, which were too liberal in the last, you know, 10 or so years, let’s fix the rule that caused it in the first place, and that’s mark-to-market.
Late Update: Here’s the video:
