We are not making this up: The Financial Accounting Standards Board (FASB) wants to broaden the “fair value” or “mark-to-market” rules that helped create the Panic of 2008. Now, they want to force banks to use those same rules not only for the securities they own, but also the loans they make.
By way of background, FASB changed accounting rules in late 2007, forcing financial firms and auditors to use “observable,” market prices to value many securities rather than models or cash flow. According to Milton Friedman, rules of …

Springfield is abuzz about how to spend our money. Gov. Pat Quinn and Comptroller Dan Hynes are locked in battle about what taxes to hike and which budgetary tricks to use in their effort to tame Illinois’ runaway spending and its crushing debt.
There is little doubt by either political party that something must be done. Since 2000, Illinois’ annual spending has grown by more than 20 percent while the economy has grown by only 12 percent. Illinois’ debt has grown by more than 57 percent over the same period. Every …

We’ve railed against Mark to Market Accounting for 9 months.
Bloomberg announces it this morning.
The Financial Accounting Standards Board, pressured by U.S. lawmakers and financial companies, voted to relax fair-value rules that Citigroup Inc. and Wells Fargo & Co. say don’t work when markets are inactive.
The changes approved today to fair-value, also known as mark-to-market, allow companies to use “significant” judgment in valuing assets to reduce writedowns on certain investments, including mortgage-backed securities. Accounting analysts say the measure, which can be applied to first-quarter results, may boost banks’ net income by …

 Last week was a very good week for those who believe in the US economy.  The stock market bounced off a new low, and while they have yet to capitulate, short-sellers are definitely on the run.  Two developments put the pessimists on the defensive.  Number one – velocity has apparently returned.  Number two – overly strict mark-to-market accounting has finally come under attack by Congress.
   The early signs of a revival in velocity were evident a couple months ago, before a dollar of new government spending got out the door.  …

After 6 months of mind numbing minutiae at the Chicago Daily Observer, the FASB  might be on to something…
The head of the Financial Accounting Standards Board (FASB) — which, along with the SEC, oversees corporate accounting — told a House panel today that “in three weeks” his organization will issue new guidance on mark-to-market rules, allowing financial firms some flexibility in accounting for the toxic assets poisoning their balance sheets, the Associated Press is reporting.
Read more at the Washington Post

Maybe if Warren Buffett says it, Washington will finally listen.
The Omaha oracle, in his appearance this morning on CNBC, called for suspending mark-to-market accounting for purposes of determining whether banks meet regulatory capital standards. He also argued that with sweeping guarantees of depositors and bondholders in place, there’s no need for government capital injections: Banks should be allowed to earn their way out of trouble based on the princely spreads now available, which they can readily do.
Read More at the Club for Growth

Buried deep in the bowels of the NY Times this past weekend, Ben Stein had a few remarkable ideas:
1) End Mark to Market Accounting
2) Revive the Uptick Rule
3) Reduce speculation on Credit Default Swaps
each of which should lead to reduced volatility in financial stocks. As Stein puts it
“Now, some of the decline in the financial markets is occurring for a very good reason: real concern about profits and coupon payments. But some of it is simply a result of the internal workings of the markets, which are pushing securities …

The most disastrous Bush policy that Mr. Obama is perpetuating is mark-to-market or “fair value” accounting for banks, insurance companies and other financial institutions. The idea seems harmless: Financial institutions should adjust their balance sheets and their capital accounts when the market value of the financial assets they hold goes up or down.
That works when you have very liquid securities, such as Treasurys, or the common stock of IBM or GE. But when the credit crisis hit in 2007, there was no market for subprime securities and other suspect assets. …

Suspend mark-to-market accounting: Critics say suspending mark-to-market accounting would reward banks for their bad behavior, and send a message that toxic assets are merely “temporarily” depressed vs. permanently damaged. Supporters say it will give the banks “breathing room” to sell those assets at something other than rock-bottom prices. Najarian does believe Secretary Geithner will announce an at least temporary suspension of mark-to-market sometime in 2009, spurring a huge rally in beleaguered bank stocks. (Personally, I think the government should put insolvent banks into receivership; but since it appears that’s not …