By Lewis K. Uhler, Founder, National Tax Limitation Committee

President Obama is not going to let a crisis go to waste, as his chief of staff Rahm Emanuel suggested recently. The President is using the financial crisis as “cover” for policy changes across a broad front of issues: health care, energy, education, welfare, to mention but a few. But he has failed to address the key issue: the banking crisis itself.

The solution is relatively simple and straightforward … and has been urged by none other than an Obama supporter, Warren Buffet, as well as many free-market conservatives. The proper medicine: suspend “mark to market” accounting for regulatory capital purposes.

What this means is that banks and other financial institutions, including insurance companies, will not be required to mark an asset to zero just because there are no buyers for it. Within the securitized mortgage packages, even if some mortgages are in default, there are performing assets and significant value remaining in the homes in default. But, because these assets have not been disassembled and the parts separately analyzed, the “package” value cannot be determined. And illiquidity in the marketplace limits the number of buyers who might otherwise vie for these assets. An example emerged just the other day when AIG Insurance Co. reported a $62 billion additional loss, on top of the billions taxpayers have already forked over to this company. But “only” $2 billion represented an actual operating loss; the other $60 billion was purely an accounting loss linked to mark to market and other valuation rules.

So marking to market is a certain path to exacerbating the financial crisis – artificially. Let’s change the accounting rules for now, improve bank balance sheets without further taxpayer bailouts and get our financial system back on an even keel.