Providing for Congressional Disapproval of the Rule Submitted By the Securities and Exchange Commission Relating to ``Staff Accounting Bulletin No. 121''--veto Message From the President of the United States

Floor Speech

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Mr. SHERMAN. Mr. Speaker, let me address the Democrats in this Chamber and say: Sustain President Biden's veto.

This is the worst possible week for Democrats to do anything else but to stand behind President Biden's veto. If you vote the other way, then you can explain to the press that you repudiated the President's decision and that you voted to override a Presidential veto--something I don't think we have done in a long time--because you had extensive conversations with Paul Munter, the chief accountant of the SEC, and he was unable to convince you that Staff Accounting Bulletin 121 properly lays out for generally accepted accounting principle purposes which asset should be on the balance sheet.

You can then discuss with them how you also commented on a host of other accounting principles that put assets on the balance sheet that are not actually owned but might be leased or held by the company on whose balance sheet they are listed.

You can then discuss with them your personal views on accounting theory and try to convince them that you repudiated the President because of deeply held concerns on what assets should and should not be on the balance sheet. However, they will not listen. They will tell you that you voted to override a Presidential veto this very week.

Now, we are told that somehow this is going to prevent banks from acting as custodians. It does not because we have three accounting systems in this country.

We have tax accounting, which is separate from GAAP, or generally accepted accounting principles, which are for disclosures to investors; and we have a third accounting system for regulated companies, particularly banks, called regulatory accounting principles, or RAP.

This pronouncement doesn't deal with RAP. Banks are free to do what they want. They must inform their investors what they did, and then the investors can decide whether that bank is one they want to invest in.

Now we are told that we should override SAB 121.

What effect does that have?

Not only does it take crypto off the balance sheet, it prevents the chief accountant from writing another regulation or staff accounting bulletin requiring footnote disclosure. So then you would be voting for no disclosure to investors of the very significant risk of holding these crypto assets.

You can argue for balance sheet disclosure. You can argue instead for footnote disclosure. However, if you vote today for no disclosure in the financial statements, then that is a repudiation of all modern accounting theory.

I did want to point out, as the ranking member has, that there is a substantial risk to banks in holding crypto assets, and Sam Bankman- Fried's fraud is just one of many in the crypto world. So this disclosure is necessary for investors to decide what risks they are taking when they invest in the stock of a bank.

So, in summary, if you believe that crypto assets that the bank is holding as a custodian should be on the balance sheet, then vote ``no.'' If you believe that crypto asset risks, the risks that the bank has by acting as a custodian for crypto, should only be disclosed in the footnotes, then vote ``no.''

If you have no deeply felt opinion on whether generally accepted accounting principles should cause assets that are being held by a custodian or a lessee should be on the balance sheet, should be in the footnotes, or should not be in the financial statements at all, if you do not have a deeply held personal belief on this technical matter of accounting, then vote ``no'' and sustain President Biden's veto.

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Mr. SHERMAN. Madam Speaker, this resolution is terrible accounting policy. It has nothing to do with whether banks are allowed to act as custodians since it has no effect on bank regulation, no effect on the calculation of their capital, and no effect on regulatory accounting.

This resolution deprives investors of the knowledge of what risks the bank they are investing in is running. It says you can't put it on the balance sheet on the theory that nothing should be on the balance sheet unless it is owned by the entity whose balance sheet is being filed.

Anyone familiar with lease accounting knows that that is not the basic principle that is carried out with an awful lot of assets that are listed on the balance sheet.

It goes further. It says not only can't the chief accountant and the staff accounting bulletin require disclosure on the balance sheet, but they are prohibited from doing another regulation and disclose it in the footnotes. This is terrible accounting policy.

Madam Speaker, I urge my colleagues to vote ``no.''

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