We posted about mark to market accounting a while back (you know, the notion that an asset should be valued based on what someone is willing to pay for it, rather than what you wish it was worth if everything went the way you wanted), and mark to market’s imminent demise. Now, Lee Raymond’s long lost brother and chairman of the Financial Accounting Standards Board (FASB), Robert Herz, has been ganged up on by Congress and lobbyists, who threatened him with wedgies, swirlies and the removal of all of the FASB’s power, and mark-to-market is basically no more.

What does this mean? Check out Bloomberg’s headline: Mark-to-Market Lobby Buoys Bank Profits 20% as FASB May Say Yes. Check out who benefits:

Citigroup had $1.6 billion of losses last year for so- called Alt-A mortgages, according to the company’s annual report. That loss would be erased with the new FASB rules, Dietrich said.

Bank of America Corp., in Charlotte, North Carolina, reported “income before income taxes” last year of $4.4 billion. The FASB proposal on impaired securities would increase that figure by about $3.5 billion, or the amount of “other- than-temporary” losses that the company recognized, Dietrich said. The new rule would mean the loss would be stripped out of net income, boosting earnings, though it would still be reported in financial statements.

Oh, glorious day! Now, instead of valuing the banks’ assets at market price, we can trust them to value the items at a price that will assuredly be higher, because that’s what they feel it’s worth. Um, these are the same guys who bought these assets over the last few years. Did they suddenly buy a clue as to what the assets are worth? They obviously didn’t have one before.

Mark to model makes sense if you trust the person creating the model, and it’s an asset that the owner plans to hang on to for a while. But these days, the trust is completely missing from the equation. It’s good for a nice rally right now, but it begs a few questions: Will it dissuade investors from buying equities, now that they know these asset valuations will be subject to inflation and manipulation? Will it actually get this crap off the banks’ books or will it just drag our housing problems out?

I don’t know. But for now, hug a lobbyist and thank them profusely for the rally! Unless, you were short banks today, in which case you probably want to punch one.