Now what happens?

Well, Congress approved the “bail-out” and Bush signed, it, but will it really help?

An opportunity.

There’s an opportunity now that the financial markets will stop freaking out, but it’s just an “opportunity.” The larger problem is that we have a partial solution to a world-wide problem. This was just step one. We need better financial oversight. The deregulation of banks and securities companies was a bad move. Their lobbyists will have a hard time convincing legislators that the rules shouldn't be ratcheted up again.

The greater problem is that the run-up has devastated financial markets and economies everywhere. It will take a lot of time to get the markets and lenders to feel better. Unfortunately, we’re in for the long haul.

A solution.

We need revised financial accounting rules. As I’ve said before, “mark to market”, while fundamentally a good concept, requires holders of mortgages and mortgage-backed securities to assume the worst. In come instances, that’s the right stance, but it’s been applied with a broad brush, which isn’t.

The SEC needs to bring back the “uptick rule”. While a good case can be made for short-selling, it needs controls. Short sellers shouldn't be permitted to have uncovered positions. As it is now, the stock market becomes a casino.

Temper the consolidation of the banking industry. Although allowing large “good” (or maybe the correct term is “better-off”) banks to absorb other large banks that are in trouble is a quick solution to some of the recent problems, is it really a long-term solution? Concentrating deposits in a few institutions creates the potential for a repeat of the Japanese banking debacle. We’re at the point in the US that over 30% of deposits will be in just three banks. That leaves the future potential of having many institutions that at “too big to allow to fail”- a bad position to get into.

Restore confidence in the housing market. We had a bubble, now a bust. But was it really? Homes are places for families to live, not investment vehicles. Unfortunately, they became treated as the latter, which lead to unbridled price growth and irresponsible production. Housing prices needed a dose of reality. Their values should reflect realistic affordability in tune with incomes.