FASB ruling very significant for banks

The FASB may vote this week for a change in mark-to-market accounting rules through their overhaul of fair value accounting. The implication for the banking sector is huge. The impact on the PPIP program will also be significant. This will also be a massive a change for investors. 

Think about it. Assets that have been priced today against recent sales based on distressed levels from a lack of liquidity may increase in value tomorrow. There also may be less reason for banks to sell assets which are marked at prices that represent their long-term value and not current expectations. Most banks may prefer to hold these securities against selling them for a loss. Yet what are they really worth? The values will be based on models which may not have a clue of what are the true timing for these cash flows.

But if we change prices today will these banks really be more valuable? What happens to the government stress tests? How are investors going to determine what banks will be worth? Who will approve the models that will be used?  

It is not clear all of this will be good. The law of unintended consequences will be at work.