Much political hay will be made this week over the proposed bailout bill. Could anyone have scripted a more bizarre scenario only a month and a half away from the national election?

While the candidates duke it, figuring which way a position will garner them more votes from the other or get thos undecided voters to decide in their favor, there will be another fight going on: the battle to dump fair value accounting.There are rumors of legislative action that calls for a moratorium on Statement 157.

As if Statement 157 had anything to do with the crisis. Understand one thing if nothing else: if a bank or investment firm makes serial horrendously stupid investment decisions, like continually lending money to people having no wherewithal to repay, hiding that fact from investors will not make you whole. It will not resolve a liquidity crisis. Fair value reporting tells investors what assets are worth, and gives investors a heads-up on managements' stewardship of assets.

The problem with fair value accounting now is that it's telling investors that there wasn't much stewardship at all. Go back a few years, when these firms were reporting record earnings: did anyone question fair value reporting then? Of course not. It's a different story when fair value reporting shows culpability.

The current "blame the accounting" mode is like berating the UPS delivery man who brought you a pair of tan Gucci loafers instead of black ones you ordered. What did UPS have to do with faulty goods? Nothing; Gucci screwed up. What does Statement 157 have to do with crummy asset values? Nothing. Managers screwed up.

It's doubtful that many critics of Statement 157 actually ever read it. If they did, they might actually see that this didn't sweep in any broad new applications of fair value reporting. The last standard that required many new applications of fair value accounting was Statement 133 on derivatives - back in 2000. Firms have always been required to write down impaired assets. There's never been a bye to just leave junk on the balance sheet, even before Statement 157.

What's different now? Two things. Statement 157 requires far more disclosure about the nature of financial instruments gracing the balance sheet. Firms always had to take a stab at the value of a security before; now when they do, investors have an idea of how that figure was developed - so they can believe it or not. Hence, the disclosures about Level 1, 2, and 3 hierarchies of fair value. Sunshine on how numbers were developed: that's the biggest improvement in reporting to investors brought by Statement 157.

The second difference: the kinds of financial crud now subject to fair value reporting has never been this plentiful, thanks to the imagination of lenders and investment bankers who concocted CDOs, CDOs-squared, CLOs and all the other alphabet-named implosion devices. Of course they're hard to value; that just might have something to do with why they don't trade. If these things are now nearly worthless, why is it better to delude investors into believing they're worth something more? Just so the firms that made poor decisions can recapitalize themselves from deceived investors?

If there's anything that should have been learned from this fiasco, it's that markets need information to function well. It seems as if the firms that have tanked didn't even have good information INSIDE their own firms about risks, collateral and cash. Taking information away from investors not only puts them at a disadvantage in making investment decisions - it give the advantage to the already-inept. So how can you expect efficient capital allocation at a market level?