Some commentators — including Lynn Turner — have pointed out that Section 132 of the bailout draft appears to be an effort by Congress to empower the SEC to immediately suspend mark-to-market accounting, bypassing normal due process rule making with an “order” that would not require public notice or comment.
I have not researched the constitutional implications of Congress authorizing the SEC to issue such an order, but I stand by my original statement that even without Section 132, the SEC could “suspend” FASB 157 next week through abbreviated due process. I think the President could do so today, if he believes — as some seem to be suggesting — that the Statement constitutes a threat to the security of the United States.
However, the emphasis on FASB 157 as the accounting culprit (if accounting can be said to be a culprit) is misplaced. FASB 157 merely establishes methods for valuing assets. It does not, itself, trigger application of those methods. This theme was elucidated in more detail by Lynn Turner one week ago. Readers with a stomach for more technical detail may find this JP Morgan Research Memo worth a look.