First there were the bank bailouts, now they're changing the accounting rules. Relaxing the rules on how banks value their assets might help them look better in this financial crisis, but it won't solve the problem.

When financial markets were up, such assets as loans, securities, derivatives, mortgages, property, also rose in value, showing the banks to be strongly capitalized. The message: the banks are capable of lending even more. But when the US subprime loan market collapsed, resulting in the credit crunch, those same assets have been marked down in value. Indeed, some are worthless.

So in October, the European Commission and international accounting standard setters allowed banks to reclassify some assets as long-term investments. Why is this important? Simply because it took the movement in the value of those assets off the profit and loss statement, and parked it somewhere else. The result: banks will be able to lose money, without showing it in their accounts and get away with it, despite the worsening financial crisis.

And sure enough, Deutsche Bank was first out of the blocks, as reported here, when it capitalized on the new accounting rule to report a pretax profit of 93 million Euros, or $120 million, in the third quarter, and reduce write-downs by more than 800 million Euros. In other words, it turned a loss of 800 million Euros into a tidy profit by juggling the books.

It makes the US banks look like models of probity.