Maybe Adam Smith's principals should be given a chance to work.

It’s possible that the members of Congress are smarter than they're often given credit for being.

Right now, we’re in a “market correction.” a tough one, maybe as bad as the Great Depression. Hopefully not.

We’re where we are as a result of lack of oversight, greed, and the concept of letting others be responsible for actions. A bail-out isn't a good thing in concept. It lets people and companies get a free pass for the bad decisions that were made. Granted, as a result of the mess that we’re in, something needs to be done quickly to restore faith in the markets. But it has to be done right.

And there are more ramifications to it being "done right."  For instance, as it stands now, three banks hold over 30% of all of the deposits in the U.S.  A perfect recipe for them being classified as "too big to fail."  It's a potential disaster in the making.  Remember the Japanese financial debacle that resulted from too many banks being protected from their own mistakes?  We don't want to see that again.

© 2007, Despair, Inc.

Fortunately, with Congress’ balk, the administration seems to be more open to compromise and making the proposed legislation more of a true “Fix” than the original proposal that hoped that throwing money at the problem it would make it go away. The real issue is to regain market stability is to have depositors and investors again be comfortable. Raising the FDIC insurance limits will go a long way to comfort the former. It’s been stuck at $100,000 for 28 years, far too long. The suggested quarter million limit is a nice round number and will help.

Getting investors comfortable will be another mater. It’s being proposed that the “mark to market” accounting rule be eliminated. This is a problematical issue. Investors want to know what their investments are really worth, so theoretically the concept is a good one. But when there are uncertainties, the question becomes “what is the true value?” In the case of securitized mortgages, many felt that the best way to value the bonds was on a worst-case basis. But is the worst-case the reality? True, there have been many defaults, but over time the value of the mortgages is likely higher than they appear in the short term. Thus, “mark to market” became a rush to judgment that didn't help the situation. An adjustment to the accounting rules may help.