Fear of Regulating

In my "opinion" the market should not really straighten out until the Bush Administration pleads openly for significant, meaningful, financial regulation, or the Democrats come in and do the required re-regulation.

Otherwise Wall Street will always "game" Main Street, and the World (equivalent to "Main Street" for awhile).

The following is the Op Ed referred to in full, given the large text it deserves:

To understand the White House’s blueprint for regulating the financial markets, start with what the Bush administration did not do. It did not offer America a plan to respond to the ongoing credit crisis or to the Federal Reserve’s dramatic intervention to prevent the collapse of Bear Stearns. It certainly did not provide a roadmap for avoiding this sort of meltdown in the future.
The Fed’s role in the Bear debacle has put taxpayers at risk of having to shoulder big losses, but the administration’s so-called regulatory reform does not address what the Bear mess made obvious: if something goes badly wrong in under-regulated or unregulated corners of the financial markets, it could topple the whole system.
In fact, the blueprint was mostly developed before the current financial crisis and accordingly comes across as outdated. The message of the administration’s proposals is that the markets will — and should — return to where they were before the near-collapse of Bear Stearns. It’s doubtful whether many of its suggested policies would have been apt even in that earlier context. It’s indisputable that they are inapt now.
It will be up to Congress — and the next administration — to create the necessary new rules for 21st-century financial markets. These include requirements that firms engaged in risky financial behavior maintain large amounts of high-quality capital, other limits on borrowed money and complex derivatives and incentives for bankers’ pay that hold them accountable for losses.
There may be nuggets in the administration’s blueprint that would be worth saving for that serious work. The proposal for a regulator whose authority is defined by the type of financial product, rather than by industry, could benefit consumers and investors — if the regulator has the power to enforce standards. But as Congress moves forward with its investigations of the credit crisis, it’s important for lawmakers and the public to realize that the administration’s ideas are fundamentally flawed.
Its proposals are premised on the notion that market discipline is the most effective tool to limit risks to the financial system. Current events show how absurd that is. Discipline was utterly lacking as today’s problems were being created. In the absence of rules — and regulators who are willing and empowered to enforce them — market discipline is a fantasy.
Sure enough, the Bush blueprint is weakest when it comes to regulation of the financial system beyond banks. One key proposal would allow the Fed to gather more information from such entities as Wall Street firms, hedge funds and private equity partnerships, but it could take action only if overall financial stability was threatened. That would institutionalize the Fed’s role as bystander while bubbles inflate and crisis manager when they burst. That’s a recipe for more crises. Ben Bernanke, the Fed chairman, told Congress on Wednesday that broader reach would have to be accompanied by “adequate powers, authorities, expertise and so on.”
It’s probably useless to hope for anything better from Bush administration officials. They are complicit in the credit crisis because the anti-regulatory ethos and practices of the administration fostered the conditions for the debacle. It’s difficult to solve problems of one’s own making and impossible to respond effectively if you don’t first face up to your role in causing them. The administration apparently prefers to perpetuate the myth of self-policing, self-correcting global free markets, rather than own up to the fatal flaws that are now so evident in that myth.
In the end, Mr. Bush’s regulatory blueprint will allow him to leave office with that ideology in tact — in his mind at least. The real work will be left to others.