Is mark-to-market accounting causing the crisis?

One of the themes in our textbook is that seemingly innocuous rules can have real effects if they are tied to decision making. Many argue that banks' reluctance to lend money is tied to the mark-to-market accounting rules they are using. If the underlying value of a bank's assets decline then then they have to mark down their equity which reduces the amount of money they can lend.

If this is indeed causing the crisis, we may have a nice natural experiment to test the hypothesis. FASB, the accounting folks who brought us mark-to-market accounting rules, are now suggesting that banks use cash flow analysis instead:

What this means is that if financial institutions are able to argue cash flow analysis to the auditors, the fire sale write downs of illiquid loan pools will no longer erode financial market capital.