Just as the Group of 20 leaders were preening and congratulating themselves for giving good summit, especially on re-regulating the financial system, the Americans have driven a huge hole through their pretensions.

The Americans are back fiddling accounting rules to suit themselves — changes to the mark-to-market rules for valuation assets has watered them down to the point where the likes of Citigroup, Bank of America and the like will have far more freedom in choosing the amount of writedown they can make.

Seeing it was this sort of loose freedom that helped create the mess in the first place, the changes are going to be lauded by banks and others. Just wait till the banks use the changes to start smoothing and bolstering profits, then boosting their pay and bonuses, claiming they are over the worst of the problems.

The changes to what’s known as mark-to-market accounting will allow companies to use “significant” judgment when gauging the price of some investments on their books, including mortgage-backed securities. Analysts say the measure may reduce banks’ write-downs and boost their first-quarter net income by 20% or more.

The change saw the the US Financial Accounting Standards Board voting overnight allow banks more freedom to use their own valuation models, rather than current market prices, for assets where markets have become illiquid. A second rule change means banks will only have to recognise a part of any impairment in their profits.

Previously the rules were tight: they had to use market prices and they had to write off all the impairment.

The Standards Board voted split 3-2 to approve the rule changes. From reports, it was the most attended meeting of this body in its history with hundreds of bankers, lawyers, analysts and others attending. The rule only applies to American banks. Those in Europe and elsewhere will have to wait until a review promised overnight by the International standards group is completed.

US investment analysts, who are no angels themselves, criticised the move, as did investor groups.

It’s like putting the inmates in charge of the rules for running the asylum that the financial system has become. The banks created the problem with securities (CDOs etc) they didn’t understand, still haven’t full accounted for and valued wrongly, now they are being allowed to return to the free and easy days where they did what they want.

The Group of 20’s tough new approach to tax havens — lists of countries that do not comply with anti-secrecy rules will be published almost immediately — was seen as a big win for the French President, Nicolas Sarkozy and German Chancellor, Angela Merkel who campaigned strongly for new sanctions and regulations on finance.

These also include a common approach to managing “toxic assets”, radical reform of the banking system, new regulatory systems including a “financial stability body” to act as an early warning system worldwide and caps on financiers remuneration.

Common approach to toxic assets. What a crock. What about a common approach to managing assets no one still knows how to value and whether that endangers the banks?

The change to these accounting rules will now embolden US banks and their mates on both sides of the US Congress, who helped give us the subprime mess and then the collapse, to water down other proposed changes, such as lifting the amount of capital banks will have to have; cutting or altering the amount of capital to be set aside for risky deals, and of course, ignoring the restrictions on pay and bonuses.

The banks’ own valuation models failed to pick up problems in subprime mortgages, corporate loans and the securities created from them, such as Collaterallised Debt Obligations (CDOs). That led to the current situation of insolvent banks, the worst global recession in 80 years, rising unemployment and untold misery in the US and around the world.

But the banks and their mates in the US Congress, who pressured the Accounting Standards Board into making the change to help their campaign donors and ‘good friends’ have ignored all that. The pressure came from Democrat and Republican alike and was not opposed by President Obama and his Treasury Secretary, Tim Geithner.

For that reason, the softening of the rules should be seen as another part of the Obama Administration’s bank bailout policy. Banks and some in European Governments have been pressing their accounting groups into easing rules in this area, but nothing as dramatic as the move by the Americans. Something could start now the Americans have gone to water.

US analysts reckon we will see the impact in coming weeks when the likes of Citi, Bank Of America, Morgan Stanley, Goldman Sachs and others bring out their latest quarterly results: they could be 20% or more above where they would have been.

The markets for these sorts of assets such as CDOs and Credit Default Swaps are illiquid because no one trusts or understands them. Now the very same people who created this alphabet stew of financial confusion and disaster, are to be trusted with valuing them once more.

It is sowing the seeds for another financial crash in the not to distant future when we awaken one day or look at our screens and TVs late one night to find that a respected name has gone belly up, having run out of money. Then the race to the bottom will resume.