The following are excerpts from a speech on Feb. 8, 2007 given by Peter R. Fisher, managing director, BlackRock, and former Treasury Undersecretary. The full speech can be found at:
Can the federal government become financially literate? Or, more importantly, can it learn to behave in a financially-literate manner? Reasonable people may conclude that the best answer to this question is “no, it can’t: Abandon all hope, ye who enter here.” That option is not open to me and I hope not to you.
The Federal government is not a limited purpose organization; it has many objectives. But if it is going to take on the responsibility of intervening in a highly complex market of investment and actuarial exposures, it’s a shame that it cannot do this with its eyes open to the financial risks and to structure its balance sheet accordingly.
A zero-sum debate between cash and accrual accounting is not helpful. The answer is both. I would like to see more emphasis on accrual accounting but I wouldn’t hide or do away with the cash budget.
We hoped that some day Congress might take notice of the accrual positions before the start of the legislation season in January, rather than when the horses are already out of the barn a few months later. It would be even better if individual bills had to be scored on their accrual implications.
At BlackRock our portfolio managers have a mind-boggling array of risk measures and credit information when making a decision to buy or sell a single bond or stock. Maybe we could get Congress to consider more than one set of numbers when they allocate national resources.
I would like to see an additional requirement that, prior to Congressional votes, there be an accrual accounting impact statement of any proposed legislation, scored by CBO but consistent with the methodologies used in the Treasury’s Annual Financial Report.