Banks can ignore the market's message all they want. They can't make investors believe them.

Contrary to many news reports, the Securities and Exchange Commission and the Financial Accounting Standards Board did not loosen the rules for fair-value accounting when they released new guidance on the subject on September 30. Assets that had to be "marked to market" before still must be valued that way today. And the methods for doing so haven't changed.

This means the beatings will continue until investor morale improves. And there are a lot more to come.

Consider just the most obvious write-down candidates. As of September 30, there were 261 US-listed banks and other financial companies trading for less than 70 percent of their book value, according to data compiled by Bloomberg. Together, they had a market capitalisation of $128.2 billion, compared with $331.7 billion of book value, or common shareholder equity.

So, more than $200 billion of these companies' net assets didn't exist when the quarter closed, in the market's view. (Three companies — Wachovia Corp., American International Group Inc. and Fannie Mae — accounted for about half the gap.) When I ran the same analysis again yesterday, it turned up 334 companies, with a $274.2 billion price-to-book differential.

Hartford Financial Services Group Inc., with a $7.5 billion market cap, trades for less than half its book value. Regions Financial Corp.'s market cap is down to $6.8 billion, or about a third of the company's book value, which includes $11.5 billion of the intangible asset known as goodwill. E Trade Financial Corp., with a $1.3 billion market cap, also trades for less than its goodwill, which is the ledger entry a company records when it pays a premium to buy another.

Were the SEC to suspend the fair-value accounting rules, as many banks and lawmakers have pleaded, investors would distrust corporate financial statements even more than they do already. It also would exacerbate banks' capital problems. When investors don't believe companies' numbers, they flee, making capital-raising more difficult.

The reaction to last week's joint SEC-FASB guidance was much like the one in March when the SEC staff sent a similar letter to financial executives explaining the ins-and-outs of the board's fair-value standards.

Just like last time, banks cheered when told that companies need not mark their holdings based on forced liquidation sales, although that was in the rules already. Theories emerged that the SEC was giving a wink to managers looking to avoid write-downs.

Press accounts claimed the September 30 guidance gave companies more leeway, as if they didn't have lots already. The Mortgage Bankers Association said the clarification "should allow firms to write affected assets back up to their intrinsic values". Loosely translated, intrinsic value is what a banker hopes his company's assets will be worth someday, not what they are now.

Actually, the SEC and FASB merely explained what the rules are. They reminded managers that measuring fair values may involve lots of judgment for balance-sheet items that don't trade in active markets. Where broker quotes aren't credible, companies can look to their own data and projections about things like future cash flows to form estimates. And there's no hard-and-fast rule for deciding if a loss on a given security is only "temporary," in which case a write-down might be avoided.

Indeed, every line in last week's tutorial came straight from generally accepted accounting principles. That includes the oft-demonised FASB Statement No. 157, under which companies must disclose details about the reliability of their fair-value measurements.

"This isn't some wink-and-nod document that says somehow you don't have to follow GAAP, or you suspend recording losses," James Kroeker, the SEC's deputy chief accountant, told me. The FASB's chairman, Bob Herz, said the September 30 statement didn't change GAAP. Rather, it provided "helpful guidance in applying GAAP in the current situation."

That may surprise some executives who had lobbied for a break and thought they'd gotten one. If they're still holding out hope, they should review a separate explainer the FASB released last week. In that document, the board reminded companies that liquidity risk, among other things, must be built into their valuation models.

So estimating the value for something like a toxic mortgage-backed security won't be as simple as imagining future cash flows and calculating their present value using some miniscule discount rate. Introducing liquidity risk into the equation when markets are frozen could be a killer, even with rosy cash projections.

That's a far cry from the mortgage bankers' spin that the new guidance provides an easy way to write up asset values. The audit firms are sure to have tough fights with clients soon.

Critics of fair-value accounting say it drives needless investor panic. Write-downs beget stock-market losses that trigger more write-downs, and so on, they complain. That is the reality of what's going on, though.

Mark-to-market accounting didn't force global banks to lever up during the credit bubble. It didn't make executives outsource their brains to AAA-happy credit-rating companies. Nor did accounting rules compel AIG to sell hundreds of billions of dollars of credit-default swaps and agree to post untold billions of cash collateral if the swaps' value soared.

Politicians may kill fair-value accounting yet. You could reduce their argument to a bumper-sticker slogan: "I wouldn't have cancer, if my doctor hadn't told me."

The rules are here to stay, for now. This will be one ugly earnings season.

Jonathan Weil is a Bloomberg News columnist. The opinions expressed are his own.