Dropping mark-to-market is no miracle cure, but it would reduce the pressure on banks and regulators to make irrational choices about the disposition of questionable assets. Banking might even regain some of its appeal for equity investors, who might see an attractive bet that bank-held assets are oversold -- that is, if they don't have to worry about unpredictable regulatory actions. Real confidence is organic: not something that can be conjured from Mr. Geithner's promise that Mighty Mouse is here to save the day.
Also: Talk about "moral hazard" is fantastically beside the point right now. Our biggest banks have already been comprehensively guaranteed by the federal government, and they need comprehensive monitoring to make sure they aren't rolling the dice. Regulatory forbearance doesn't make this moral hazard worse; at this point, it simply represents the least-cost approach to finishing the job the government has taken on of holding the banking system's hand while it steps back from the abyss.