More fallout from the Financial Accounting Standard Board's latest attempt to make the banks happy. From now on, it should be called the Fake Accounting Standards Board.

As Peter Schiff, the CEO of Euro Pacific Capital writes , the FASB's decision allowing companies to use their own judgment to a greater extent in determining the "fair value" of their assets is a case of pretending that those toxic assets are really valuable assets that for some irrational reason no one wants to buy. And that is very dangerous because when the banks eventually do collapse, the losses will be so much greater. All you are doing is pretending that bad bank assets are merely "impaired" and refusing admit they are worth a fraction of their nominal value. Indeed, they might be worth zip.

As Time Magazine's Curious Capitalist blogger Justin Fox writes, the banks have basically been given permission to lie, and the market has rejoiced. Go figure.

The most scathing criticism comes from Henry Blodget who says the US is going the same way as the Japanese government and banks did in the 1990s.

"Japan, the economists said, refused to acknowledge that its banks were insolvent," Blodget says. "Japan was allowing the banks to continue to pretend that they were healthy-by not writing down bad loans and by making new loans so companies could pay interest on bad loans and the bankers could say that the bad loans were good loans. Until Japan forced its banks to write off bad loans and stop making new loans to pay interest on bad loans, the economists said, Japan's economy would suffer. The economists always said this as though it was the most obvious thing in the world. The Japanese were just wimpy socialists who lacked the balls to face up to reality. And now so are we!...Now banks can go back to saying their assets are worth whatever they want them to be worth again. And we can pretend that bad loans are good loans and make more bad loans to help keep other good loans from going bad (would you like a new loan to pay the interest on that old loan?) and investors won't get wiped out and employees and politicians won't get fired and everything can be hunky dory. Just like in Japan."

As my favorite write Mark Twain once said, history doesn't repeat itself. But it sure does rhyme.