You knew they would do it, right?

The 17-nation currency rallied as the ECB said it will coordinate with the Federal Reserve and other central banks to offer three separate three-month loans to ensure euro-area banks have enough of the U.S. currency through the end of the year. The dollar dropped after weaker-than-forecast economic reports damped confidence in the recovery.

Wait a second... this isn't actually new!

Remember, The Fed previously (like more than a year ago) announced these swap lines and more-recently announced their extension.  So not only is this not new, it's not news!

But the market is up big on the non-news news.  Why?  Because it appears banks are still going to be able to lie about asset values - for a little while longer.

The last time the world had a major banking crisis, fair-value accounting rules were near the top of the list of scapegoats most likely to be denounced by government and industry leaders. Not so this go-around.

Today many of Europe’s largest financial institutions are seemingly on the brink again, driven by fears of pent-up losses stemming from the sovereign-debt debacle. Only you don’t hear much criticism of fair-value reporting anymore. That’s probably because the accounting mandarins gutted many of their fair-value rules in response to the financial system’s near-meltdown three years ago. This hasn’t made banks safer. It has given politicians and bankers one less culprit to blame, though.

Actually, it makes banks much more dangerous.  Having neutered regulators you see lots of grins and no fear that actual accounting at current value is likely to show up any time soon.  This in turn leaves banks levered up the ying-yang and in many cases deeply underwater.

This in not just a US phenomena, although you can sure see it here, as most of the big banks have stock prices of half or less of the claimed "book value."  This is of course illogical; if anyone believed those values they'd immediately buy the company and make an instant 100% (or more) profit, even if they had to dismantle and sell off the bank to do it.

Clearly, the market's expectation is that the so-called "values" are lies.  And from this belief comes systemic risk, because now any event that threatens to force recognition of true value is an immediate bankruptcy trigger.

Fixing this requires only two things: Forcing recognition at fair value and One Dollar of Capital for all unsecured positions.  That ends the problem immediately.

But, of course, that also ends the skimming and rip-off operations too.

We won't do it, and I bet that right now the bounce in the markets is causing people in DC to exhale, thinking that once again we've averted death and it's all going to be ok.

Hint to the DC Critters: No it's not, and the time bought this time around is likely to be much shorter than you got the last time.  Were you wise you'd use this reprieve to dismantle ex-rep Kanjorski's BS game from early 2009 and force back in fair-value accounting.

But those in DC are not wise.

They're corrupt.

All of them.