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Maintaining the SEC’s current disclosure regulations is an invitation for a repeat economic crisis, said EDGAR Online president Phil Moyer, responding to the Commissions request for comments on a pending bill to create a centralized database and change the way asset-based securities get  reported. The good news is that the technical solution already exits to make ABS reporting transparent, easy, and inexpensive for both issuers and investors. We invite our readers to join us in sending their comments to the SEC.

But before you go to the SEC website to comment on the pending rule change, we recommend you read the full text of Moyer’s letter . He encourages the SEC to require issuers of ASBs to report structured data to a centralized database – in the same way public companies file annual and quarterly and other disclosures to the SEC’s EDGAR database. Moyer explains exactly how XBRL can be used to track and monitor mortgage-backed securities, so that no matter how they are re-packaged and sold.

“The complete collapse of the Mortgage Backed Securities market, the subsequent TARP bailout, and the lack of buyers of government owned MBS and the frozen credit market clearly demonstrate that investors are unable to access adequate information to model the cash flows and risks in these assets. The economic events of these past 24 months provide empirical proof that the current patchwork of issuers’ web sites and self-defined reporting standards simply do not work.

“ABSs issuers creating their own data and report formats, and posting on their own web site – without any centralized validation process from any regulatory authority – have created a veritable Tower of Babel for this market. Investors are left sorting out incompatible data labels, reporting formats, reporting schedules, file formats, and blank or erroneous data. Investors are confounded, regulators and auditors are unable to spot risks, and ultimately the market is opaque due to this systemic lack of data reporting standards.

As for cost, Moyer says it would cost an issuer of an ABS only a few hundred dollars per document, and would cost servicers a few hundred dollars per report to produce a comprehensive, sharable data file loaded with information on the ABS and smaller than a typical 3-minute song on an Apple I-Pod.

Congress also looking to XBRL

On another front, the US House of Representatives this week passed HR 4173: Wall Street Reform & Consumer Protection Act, which refers to Interactive Data” in Section 7404. So XBRL as a solution for government financial reporting is picking up speed. The bill now goes to the US Senate.

In the section titled Promoting Transparency in Financial Reporting, calls for the SEC to provide regular testimony on efforts to reduce the costs and complexity of financial reporting and encourages the use of XBRL. That bill now moves onto the Senate.