Mark-to-market accounting rules are being brought a little closer to economic reality -- accompanied by misplaced howls of outrage.
True, the ostensibly independent Financial Accounting Standards Board yesterday agreed to alter a portion of the rules only under extreme pressure from Congress, and that’s unfortunate. Still, the standards have forced many financial institutions to overstate losses on trillions of dollars worth of assets, intensifying the global financial crisis.
Defenders of the rules say they protect bank investors and changing them will allow institutions to hide future losses. To the contrary, they have helped drive down the value of bank stocks, made shorting the shares much easier and caused bank stockholders to lose hundreds of billions of dollars in such companies as Citigroup Inc. and Bank of America Corp.
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