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Was too conservative accounting really the problem here?

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The market is rallying today in large part in reaction to the Federal Accounting Standards Board's decision to relax mark to market accounting rules -- a major boon to the financials as they may not have to mark down their bad assets to prices that people would actually pay for them.

Gary Weiss refers to this as a "pro-bank-fraud measure" and he's 100% right.

Does anyone really think that the root of our problems is excessive conservatism? We're in a mess created by non-existent lending standards, corruption, incompetent and co-opted ratings agencies and just general mass stupidity.

And now people are trying to convince us that if we allow banks to use the models that led us into this disaster to value securities instead of the realities of what people will pay, that will make things better. It's an absolute travesty.

The other reason this is such a bad idea is that it turns balance sheets into complete jokes that have nothing to do with what a company's assets are actually worth. Hey: Why wasn't anyone complaining when the banks were carrying these assets at valuations that were way too optimistic?

Reuters says this move gives banks "flexibility" when it comes to valuing assets. But given crooked people -- as some who will take advantage of this rule are -- with billions of dollars on the line "flexibility" on how they report their financials is just a bad, bad idea.

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DJIA+30.5410,464.25
NASDAQ+7.832,177.01
S&P 500+4.791,110.44

Last updated: November 25, 2009: 03:10 PM

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