In the acronym soup that's been confronting investors since the mortgage and credit mess began, perhaps none will end up more critical than the QSPE -- that's qualifying special purpose entity, a concept borne of accounting rules that allow banks and financial institutions to keep certain assets off of their balance sheets. Like MBS/ABS, for example. The investor panic that sent the shares of twin mortgage finance giants Fannie Mae (FNM) and Freddie Mac (FRE) into a tailspin a few weeks ago was -- at least initially -- triggered by an analyst's report that addressed a proposal from the Federal Accounting Standards Board to eliminate the concept of what many in the secondary mortgage business simply call "the Q." Doing so might bring back hundreds of billions of dollars of off-balance sheet assets onto both GSEs' balance sheets, the report warned, citing proposed changes to two previously obscure (and equally obtuse) accounting standards known as FAS 140 and FIN 46R. Analysts have suggested that as much as $5 trillion would need to come back on the balance sheets of various financial institutions as a result of the proposed changes. Either way, some market pundits that have spoken with HW have said that eliminating "the Q" would also have the effect of killing most modern securitization markets as we know them, since the transfer of risk off the balance sheet to a bankruptcy-remote entity is a critical part of the appeal of securitizing assets to begin with. Other sources have been more moderate in their views, however, suggesting that FASB's likely support for a so-called "linked presentation" approach wouldn't necessarily remove the capital benefits associated with securitization of assets, but would provide for greater transparency to investors. Rarely have market participants argued so heatedly about accounting standards. But these are no ordinary times, and nearly everyone agrees that the changes under consideration will have a deep impact on the secondary mortgage market going forward. Questioning the need for speed FASB has been expected to release its proposal on the two accounting standards by the end of August, and then leave it open for public comment for 60 days; parts of the new rule could be applied as soon as next year for companies with fiscal years beginning after Nov. 15. The desire for speed here comes as some policymakers see the QSPE construct as a contributing factor to the credit mess, under the auspices of opacity -- very few investors allegedly understood just how much off-balance sheet exposure a given financial company maintained. Or so the argument goes. The timetable has been a key source of industry and lawmaker consternation, however, with both SIFMA and the American Securitization Forum expressing fear over "unintended consequences" in a letter sent on July 16 to FASB. Saying that the "risks of too much haste are high," SIFMA and the ASF suggested that a quick implementation of any proposed changes could further impair bruised balance sheets and drive up capital constraints at a time when very few firms in the financial sector could handle such a burden. Both organizations said that the changes would impact more than $10 trillion in MBS, ABS and commercial paper facilities and that any change to accounting standards would affect "large markets that provide substantial funding for U.S. business and consumers." The trade organizations' cause was joined on July 22 by House Committee of Financial Services ranking member Spencer Bachus (R-AL), who sent a letter to FASB chairman Robert Herz and Securities and Exchange Commission chairman Christopher Cox echoing similar concern over "serious unintended consequences." FASB appears to at least have considered the requests, saying late last week that it would "reconsider the effective date and transition provisions" around its proposed changes to FAS 140 and FIN 46R. In other words, dear HW readers: sit tight. Rarely do market participants hang on nails for word of possible changes to minutiae in the world of accounting, but in this case, doing so may well determine where our financial markets head in the short term. Disclosure: The author was long FRE, and held no other relevant positions, when this story was published; other indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.