"With regard to derivatives, we are concerned that, according to government estimates, trillions of dollars in notional amount of derivatives contracts are off-balance-sheet. We want proper accounting for these positions.
Chairman Alan Greenspan's recent remarks on the financial crisis in Asian countries seem to be at odds with his July 31, 1997, letter to FASB concerning derivatives. That is, there is now some indication that the lack of adequate recognition and measurement of the effects of derivative positions by many foreign banks, brokerages, and conglomerates hid from investors and regulators the true picture of insolvencies that is now emerging.
That is not the type of "risk management" we want financial institutions to engage in, and we do not believe that U.S. taxpayers want to keep bailing out those activities. Poor risk management happened, you will recall, when Congress legislated accounting "relief" for S&L's, and the debacle that ensued is now infamous in U.S. financial history."
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