Poor mark-to-market accounting. Lots of politicians, policy analysts and pundits are blaming it for our financial meltdown.

Mark-to-market, which is part of fair-value accounting, simply means that companies assigning values to assets they hold must value them at current market levels. If something is trading right around $10, it’s given a value of $10, regardless of whether it was bought for $2 or $20.

That sounds logical, right? The problem, though, and the reason M2M is getting so many opponents, is that the credit markets are in such a bind now that a lot of securities aren’t selling at all. So, technically, you might have a “market” of $0 for a security.

Because of that, there has been a huge movement in recent weeks to repeal, or at least suspend, the mark-to-market accounting standards, which some say are too onerous and have contributed to massive writedowns on banks’ balance sheets.

But mark-to-market ensures a decent amount of transparency for investors. In addition, even if it isn’t beloved by all, it’s tough to think that alternative methods could be anything but worse.

M2M opponents got a bit of what they wanted on Tuesday night, when the Securities and Exchange Commission issued an interpretation of Financial Accounting Standard 157, which contains M2M provisions.

Just in time for banks to start reporting third-quarter earnings, the SEC and the Financial Accounting Standards Board issued a clarification of the rules to say that “when an active market for a security does not exist, the use of management estimates that incorporate current market participant expectations of future cash flows, and include appropriate risk premiums, is acceptable.”

It added that “the results of disorderly transactions are not determinative when measuring fair value,” which could mollify concerns about assets being marked down to fire-sale prices.

That assuaged some concerns, at least. The American Bankers Association commended the clarification, with ABA President and CEO Edward L. Yingling saying he “applauds” the SEC for its move and that a recent meeting on the topic was “productive.”

But that was weak praise, and this may not be enough to stop opponents from crying foul, because a lot of people have been complaining about this -- including many members of Congress. Still, to rescind the rule entirely makes no sense, and leaves open a path back to Enron-style accounting.

Here’s the thing: Banks have been complaining about these rules, saying that M2M has been partially responsible for the massive writedowns they’ve had to take.

While that may be technically true, it doesn’t make sense to change it. In a Sept. 29 report titled “Shooting the Messenger,” JPMorgan’s Dane Mott and Sarah Dean said, “The reality is that fair value accounting and enhanced disclosures have helped markets quickly identify where problems exist and react to those problems. While we will not deny that at times markets have overacted (sic) to some information, such a reality is part of human nature and likely will persist no matter what accounting is used.”

Even though the likes of the SEC, FASB, the Center for Audit Quality, major accounting firms and consumer groups have come out in favor of keeping mark-to-market, it has its detractors.

Peter Wallison, from the American Enterprise Institute, a conservative think tank, said in a July note that fair-value accounting is “at the core” of the credit crisis. “Trillions of dollar in worldwide investor losses…testify to the power of accounting concepts to shape reality.”

“Why, for example, is market price important?” Wallison asked. “In the limited or abnormal case… a strong argument can be made that the market price is misleading rather than informative.”

People in the markets are smart. If folks saw securities trading for basically nothing, and thought those securities were worth something more, someone would be swooping them up. There are still Warren Buffetts out there to snap up apparent bargains like his new Goldman Sachs (GS) preferred shares.

As Jonathan Weil, a Bloomberg columnist, wrote on March 17: “Investors are fully capable of understanding that unrealized losses on hard-to-value assets are estimates. They’re also smart enough to know that values change over time.”

In other words, the free market basically knows what’s up. And the more information it gets -- information provided by rules like mark-to-market -- the better it knows what’s up.

Then, there’s the question of how else to value the assets, if not by using market value – especially when “market value” already has a ton of wiggle room.

The Sept. 29 JPMorgan note weighs in on this: “A suspension of FAS 157 would simply permit more leeway in how companies go about coming up with those mark-to-model valuations and how they disclose information in filings.”

While Wallison’s point may be correct that assets sometimes aren’t priced accurately now (and that’s debatable), it’s hard to argue that there’s a better way to price them. There may be booms and busts, but it’s basically impossible to say when we’re at a given point in the cycle. If banks don’t have to mark assets down now because they’re “really worth more,” will there be the same enthusiasm to mark assets lower in a boom time when “they’re really worth less”?

The reality on all these marked-down securities is simply this: the market got more information about what banks were holding, and it didn’t like that information. Banks made decisions during boom times that are coming back to bite them now.

We may not like what we’re seeing with bank shares plunging, but burying our heads in the sand with murkier accounting rules isn’t going to help. If anything, it would likely make investors more hesitant to invest in banks, less likely to trust what they’re being told about company balance sheets.

Don’t blame mark-to-market accounting, which is simply the messenger of the crisis, not the cause.