Monday, May 18, 2009

Accounting Rule Change for the Administration

So it's not just those bad, greedy bankers who wanted to change certain accounting rule. Monthly Treasury Statement of Receipts and Outlays of the United States Government for April released on May 12 states on its front page [emphasis mine]:

"The administration has reclassified prior month expenditures related to the
Emergency Economic Stabilization Act (EESA- also known as TARP). Consistent with
statutory requirements of the Federal Credit Reform Act and EESA, TARP purchases
are now being accounted for on a net present value basis, taking into account market
risk. Accordingly, budget outlays have been reduced and direct loan financing
activity correspondingly increased by $175 billion

And accordingly, "Monthly Receipts, Outlays, and Budget Deficit/Surplus" chart on the page 3 shows a sharp decrease in budget deficit for the month of April; without the accounting change, the deficit would have been just as deep as February and March, if not deeper. It is a cosmetic change to give the appearance of reduced deficit level.


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