Take a moment away from the financial horror show you've been watching for weeks to contemplate an imaginary one: a coal mine disaster. After the dust settles and rescue efforts are mounted, a canary is lowered into the coal mine - and it promptly keels over. What to do?

Well, if you're Congress the answer is obvious: you launch an investigation of the canary-breeding industry, because there must have been a genetic flaw that made the canary susceptible to the stress induced by the mine shaft's impure air.

That is the kind of logic being shown in the halls of Congress these days when it comes to figuring out the troubles roiling the capital markets. Fair value reporting in the financial system is the canary in the coal mine that informs investors when companies have made poor investment decisions and have dubious capital levels. If it's telling us unpleasant news about the state of things, then it can't be right. Order up an investigation of the canary-breeding industry, and that looks like what Alabama Congressman Spencer Bachus is intending to do in this letter to Representative Barney Frank. It can't be that fair value reporting might actually be saying something about the financial condition of banks; there must be something wrong with fair value reporting. So let's investigate. It's conventional wisdom and political hay-making at its worst.

It's testament to the low regard for investors held by Congress and the firms thirsty for their capital. Don't give them figures in balance sheets that show the state of the economic world as it IS; show investors the world the way we think it SHOULD be. That's a very dangerous idea that will probably be extended to other areas of financial reporting when other financial after-effects of current market instability begin to show.

[One possible area: pensions. While there are plenty of GAAP-permissible ways to minimize the funding level damage being currently wrought by markets, there are bound to be outcries over the fact that firms now show the unfunded balance of plans in their balance sheet more clearly than a couple years ago before Statement 158 went effective. The same kind of illogic applied to investigating and neutering fair value accounting could well be extended to pension and other benefits reporting. Let's hope not.]

To repeat one more time: fair value reporting is nothing new; firms have always had to report assets at what they're worth. Statement 157 did not extend fair value reporting to any new areas of balance sheets; it just gave investors more information about the integrity of fair values reported. And right now, integrity is pretty far out of fashion when it comes to the banking industry and Congress.