Robert Herz Speech to the National Press Club June 26th

Robert Herz, Chairman of the FASB, gave a speech to the National Press Club on June 26, 2009. There he commented on his perspective of the financial crisis root causes as well as possible solutions going forward.

In the speech he said, “History does not repeat itself—people repeat history”.

Highlights from his speech include:

1. Need to improve and strengthen certain accounting and reporting standards.
2. Transparency is not just a buzz word or a cliché. It is a fundamental and absolutely essential attribute of sound financial markets.
3. Need to strike the right balance—between regulation that’s respected and that effectively recognizes and manages risks—and regulation that fosters sound economic growth and competitiveness and that lets institutions fail.
4. Must clearly acknowledge the need to have proper infrastructures supporting financial markets to facilitate the timely flow of relevant and reliable information that enable informed decisions, ready price discovery and effective clearing mechanisms.
5. Must stop exploitation of regulatory gaps at many levels and the failure of regulators, rating agencies, leaders of financial institutions, investors, and others to appreciate the risks.
6. The proper operation of capitalism depends on the appropriate regulation of institutions, of financial products, and of market participants and on the existence of infrastructures that support transparency and the smooth functioning of markets.
7. Proper accounting and valuation require that companies and market participants identify, understand, and reasonably calibrate risks and returns emanating from financial assets and obligations, and be able to readily ascertain transaction prices in exchange markets.

8. Supports a greater decoupling between the determination of bank regulatory capital and FASB standards.
9. Regulations must not stifle innovation and appropriate risk taking.