By Steve Forbes, Editor-In-Chief at Forbes

Here’s good news for investors and the economy. To everyone’s surprise Robert Herz stepped down as chairman of the Financial Accounting Standards Board last month. Herz was the driver behind the disastrous 2007 FASB ruling concerning mark-to-market accounting for banks and insurance companies. The ruling unnecessarily destroyed some $500 billion in regulatory capital of these institutions in 2008–09, thereby triggering the financial panic. Once Congress forced FASB and the SEC to amend the ruling in April 2009, the devastated financial markets began a big rally that lasted until this summer.

Smarting from that humiliation, Herz and his minions were readying a new ruling that would have put mark-to-market accounting on steroids. Banks would have had to write down the value of virtually every small-business loan they had made. The flow of capital to small businesses–none too robust these days–would have suddenly stopped like blood in a clogged artery. The economy would have been sent into a tailspin, and another financial crisis would have erupted.

There’s more good news: “Equally important [as the resignation] is that the trustees are moving back to seven FASB board members instead of five,” notes William Isaac, the former chairman of the FDIC and the man who helped persuade Congress to force the mark-to-market change in early 2009. “The five-member board allowed three radicals to control. It will be much harder to get four votes.”

Thank goodness.

Original Article Located Here.