At this point the Financial Accounting Standards Board is probably experiencing what I’d call the Bristol Palin effect. That’s to say that once you’ve been shown to lose your virginity in a very public way, you can talk all you want about the virtue of abstinence but no one’s going to put much credence in what you have to say.

FASB, the outfit that sets financial and accounting rules for companies, including insurers, has always had a reputation for chastity when it came to rule-making. We don’t care how strong the hormonal pressure coming from outside is, FASB seemed to say, we’re not going to even give the appearance of looking like we gave in. We have a reputation to uphold.

That was then.

Now, FASB has to come to terms with the irrefutable fact that you only lose your virginity once.

Years back, FASB approved, after a seemingly endlessperiod of deliberation, the mark-to-market rule that is causing such havoc in the financial markets now, especially in the banking sector, when the value of assets is tanking all over the place.

Mark-to-market means banks and others have to value the assets on their books for what they’re worth now. It’ll come as no surprise to you that these assets-mortgages, mortgage-backed securities and their ilk-have seen their value drop precipitously. Thus, the tremendous hits that financial institutions have had to take on their balance sheets and the spreading, deepening pain as the recession marches on.

Needless to say, when assets seem to see their value growing daily, as they did just a few years ago, mark-to-market is oh so satisfying. Especially if you’re an executive whose bonus is tied to the growing value of those assets and the revenue they produce in spinoffs of one kind or another. It’s just human nature.

But now that the value of assets on banks’ and insurers’ books is plummeting, the mirror image of the formerly positive side of human nature kicks in. Banks don’t like mark-to-market now. And banks have powerful friends in Congress and government.

These powerful friends started to exert some pressure on FASB a few months ago to give in on mark-to-market. For a while, FASB held its ground. After all, it had always taken forever to make up its mind anyway.

Then in the last month or so, the pressure grew really intense as the mayhem on companies’ books ratcheted ever higher. The friends in high places got really pushy. FASB, finally, could not take the heat. It put out a lighter rule for comment, gave the potential commenters a mere couple of weeks (instead of months or years) to do their thing and then, no surprise, eased mark-to-market in a way that gave the banks and other companies much more discretion as to how they could value their assets.

That’s to say the banks now don’t have to assign the current value to assets that are in the toilet. They can use their judgment and if they think the asset will have a higher value in the future, then that is the value they can report.

You don’t have to be a genius to guess how banks are going to start valuing their assets. Of course this asset is worth much more than what it could currently bring in the market, so that’s the value we’re going to assign it.

The problem with this is that the same lack of transparency that got us into this situation would now be applied to the detritus scattered all across the country. How is anyone to really know what the true value of assets on a company’s books is if those assets can be assigned a value based on wishful thinking?

FASB should have stuck to its guns. Sure, there is a lot of pain and still more to come. But at least it was based on some kind of reality, the reality of the market now, not in some future la-la land.

Now when the subject of FASB’s credibility comes up, all it’s going to be is remembrance of things past. And never to be retrieved. Just like you know what…