In the end accounting is just accounting, and it can in no way exaggerate or downplay a company’s underlying economic realities. We could surely suspend mark-to-market accounting to make banks appear solvent, but if investors have a different opinion when it comes to a bank’s actual health, the more liberal rules will quickly become meaningless.
John is right as usual. Changing the accounting rules will not solve the problem. Savvy investors will still discover the truth about the assets on the banks balance sheets. If the problem is one of confidence, you can’t restore that by obscuring the truth. Read all of John’s article; you’ll learn something. Harvard does not have the largest endowment. You have to read the article to find out who does and the only hint I’ll give you is that it isn’t an Ivy school.