Fed - Mr. Gibson, as a top banking supervisor, what do you think of this remarkable accounting rule that the Fed has set for itself?

Fed doesn't live by the rules it sets for banks

Alex J. Pollock

What's good for the goose is good for the gander? This proverb does not apply if the gander is the Federal Reserve and the geese are all the other banks in the country.  

• Michael Gibson, the Fed's director of the Division of Banking Supervision and Regulation, recently testified to Congress on imposing the Basel III capital rules on all U.S. banks. 
• The Fed supports these rules.  
• Specifically, Mr. Gibson pointed out that Basel III requires unrealized losses on some securities to reduce the banks' regulatory capital as such losses already reduce their book net worth. 
• In ironic contrast, the Fed itself, which owns $900 billion of mortgage-backed securities and $1.7 trillion of Treasury notes and bonds, never recognizes any unrealized losses in its capital accounts. 
• The Fed sets its own accounting rules for itself, unlike anybody else.

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