Jack Ciesielski has a new report out that puts banks' arguments against fair value squarely in their place. And the analysis alone should make short shrift of the industry's complaints, though it no doubt will do nothing of the sort.

The accounting expert and investment adviser who runs The Analyst's Accounting Observer finds that banks account for 96 percent of all the asset markdowns to the balance sheets of the S&P 500 that he estimates would result from enactment of the Financial Accounting Standard Board's latest proposal.

More precisely, Ciesielski says, banks' assets would be marked down by $109 billion, increasing leverage in terms of liabilities to assets from 10.7 percent to 12.8 percent, or by one fifth.

So is this is just an accounting change that doesn't matter, or, on the flip side, so significant that the rule should be ditched? No, he says, because that amounts to denial.

 "Bankers would prefer presenting assets at cost, making investors guess about the amount of impairments and actual resources available," Ciesielski writes in the report released yesterday. "They fear that markets might actually provide more effective regulation than the regulators-and they fear that regulators might take a cue from the financial reporting and incorporate some of these measures into their own capital standards."

 But Ciesielski also observes that there's a common misperception that FASB dictates those capital standards and that bank lending and the economy will move in lock step with those.

As for economic doom resulting from regulators' response to the information, he asks, "Will regulators require firms to hold more capital if they start noticing drastic differences between the two measures?" And he answers the question by suggesting that might not be such a terrible outcome. "One thing should be clear from the financial crisis: more capital, and raised earlier, would not have been a bad thing at all."

The fact is, he states, regulatory standards may not have that much influence on lending. As he puts it, "lending is a banker's reflex" and driven by size of the spread between borrowing and lending costs. No one is seriously arguing that the Fed should narrow the currently wide spread that is helping banks' profits.

Moreover, Ciesielski notes, many critics overlook the fact that acquirers' book assets at fair value, so for one party to use historical cost and another fair value presents an inaccurate picture of the value of such transactions, and with them, management's ability add any through such dealmaking.

Bottom line: The current argument against fair value echoes many others in the past, ranging from the battle over expensing stock options to earlier brouhahas over fair value. As far back as 1992, he notes, bankers predicted that requiring fair value would kill the economy. But adds Ciesielski, the longstanding predictions of doom remain unfulfilled."