If I could pick one idea to purge from the American psyche, it would be the idea that rich people are special, magical wealth leprechauns who must be allowed to pursue their interests without hindrance lest the entire economy collapse. The reason this elitist Randroid idea is particularly noxious is because it results in things like this being taken seriously:

If mark-to-market accounting is to blame for the current financial crisis, then the National Weather Service is to blame for Hurricane Katrina; if it hadn’t told us the hurricane hit New Orleans, the city would never have flooded.

This is the logic the bankers are using, and they are getting sympathetic ears in Congress. The bankers have gotten two members of Congress to introduce a bill to establish a new body that could suspend accounting rules for financial institutions.

Edward L. Yingling, the president of the American Bankers Association, says the proposal addresses “systemic risks that accounting standards can have on the economy.”

Steve Forbes, the publisher and erstwhile presidential candidate, goes even further. “Mark-to-market accounting is the principal reason why our financial system is in a meltdown,” he wrote in a Wall Street Journal op-ed piece.

They say the problem, in short, is not that the banks acted irresponsibly in creating financial instruments that blew up, or in making loans that could never be repaid. It is that someone is forcing them to fess up. If only the banks could pretend the assets were valuable, then the system would be safe.

Mark-to-market accounting isn't a perfect way to keep books -- in bubble times, for instance, it makes financial institutions look much financially stronger than they really are -- but it beats what Forbes wants, which is the right to just make crap up. Lookit:

But put aside for a moment the absurdity of trying to price assets in a disrupted or non-existent market, of not distinguishing between distress prices and "normal" prices. Regulatory capital by its definition should take the long view when it comes to valuation; day-to-day fluctuations shouldn't matter. Assets should be kept on the books at the price they were obtained, as long as the assets haven't actually been impaired.

Ah, if only Milo Mindderbinder had thought of this when he was going bust from investing in all that chocolate-covered cotton! Instead of panicking and trying to unload it at bargain prices, he could have simply insisted that it was worth precisely what he'd originally paid for it and then the Syndicate would still be up and running!

In all seriousness: Forbes' argument is basically the same as the warblogger argument we heard back in 2004, namely that the Iraq war was going super-duper well but that Bush wasn't getting credit for it because the wicked hippies weren't clapping loudly enough. He's basically saying that banks should have a right to create whatever bulls*** securities they want and price them however they want without ever having to account for whether they're really worth anything. If you let them do this then pretty soon banks will be reporting record profits from their investments in magic beans. That doesn't strike me as a very wise idea.

Other news:

• D-Day reports that the Cuyahoga County Court actually believes in enforcing the rule of law and isn't allowing lenders to use forged documents in foreclosure cases. He comments:

  Basically it makes it nearly impossible to do anything but use verifiable documents and signatures, without risking sanctions and the dismissal of the foreclosure case.

  As 4closure fraud, which first noticed the affidavit policy of the court, said, “This is all we ever asked for, the rule of law, that is already in place, be followed.”

  Courts are slowly but gradually codifying policies that put much greater burden on mortgage lenders and their counsels to actually follow the law. We’ve seen in recent years that the banks cannot be expected to do that. So something’s gotta give.

  Indeed it does. But for now let's bask in a brief instance where major financial institutions are being forced to comply with the law. It's sadly a rare occurrence these days.

• On the other hand, this is highly discouraging (my emphasis):

  The five largest loan servicers, including Bank of America Corp. and JPMorgan Chase & Co., may be the first to settle with the 50 state attorneys general probing foreclosure practices, Iowa Attorney General Tom Miller said. [...]

  The probe has since widened to include other mortgage practices, with attorneys general suggesting a potential resolution should include improving the loan modification process, barring foreclosures when people are modifying loans and creating a general fund to compensate homeowners who may have been victims of wrongful foreclosures. [...]

  The group isn’t pursuing a criminal investigation, Miller said. “Our focus is to reform the servicing process and that’s inherently civil, not criminal,” he said.

  I have a real problem with this. One of the more astounding aspects of modern America is how often major financial institutions are busted for overtly criminal activity and how rarely any of them ever go to jail for it. Instead they pony up some "Oopsie!" cash, admit to no wrongdoing and call it a day. I may be old-fashioned but I'd really like to imprison the people who forged foreclosure documents, who committed perjury in foreclosure affidavits and who needlessly caused God-knows-how-many people senseless grief and agony.

• You get three extra days to file your taxes, you lucky duckies! Be sure to enjoy your recently-renewed income tax cut, as well as your soon-to-be-implemented payroll tax cut. Socialism sure is cheap nowadays, donchathink?

• And finally, here's an interesting piece on Goldman's recent investment in Facebook (or is that Squidbook now?). The piece basically asks whether Facebook can issue shares as it plans to do without having to go public. I'm no expert but if Facebook wanted to find a firm that could help them arrange a legally questionable equity issuance, they probably picked the right one.