Fed begins to riegn in the chaos

While people talk about inflation and interest rates, the focus is begining to shift to the reality that the basic instability in the markets is panic, and this is a result of weak regulations and major gaps.

As reported by the NYT

“The financial turmoil is ongoing, and our efforts today are
concentrated on helping the financial system return to more normal
functioning,” Mr. Bernanke said, according to an advance text of his
speech issued by the Fed.

“If these firms are strong, well-regulated, well-capitalized and
focused on their mission, they will be better able to serve their
function of increasing access to mortgage credit, without posing undue
risks to the financial system or the taxpayer,” he continued.

“Although short-term funding markets remain strained, they have
improved somewhat since March,” Mr. Bernanke said, reflecting both the
intervention of the Fed in offering loans to Wall Street and “ongoing
efforts of financial firms to repair their balance sheets and increase
their liquidity.”

In short bad loans were made by firms that didn't have the capital to cover them.

The Federal Reserve is expected to announce new mortgage lending rules
at a meeting on Monday. It is not known whether the Fed will
significantly change the proposal it made last December, which provoked
more than 5,000 letters, including heavy criticism from the mortgage
industry and other parts of the housing industry.

Industry lobbyists maintained that at a time of tight credit,
tougher rules could make many mortgages more expensive by creating more
paperwork and potentially exposing lenders to more lawsuits. They also
complained that the restrictions were too broad and would restrain
lenders from issuing otherwise creditworthy loans. Three of the
industry’s most influential trade groups — the American Bankers
Association, the Mortgage Bankers Association and the Independent
Community Bankers of America — separately filed letters criticizing the
proposals.

On the other hand, consumer groups complained that the
proposed rules would not be strong enough. They maintained that any
efforts to further weaken the proposal would render it all but useless.

This is a crucial moment for the future, do we want an honest transparent system or do we want the bankers to be able to steal peoples money then bail out while the markets collapse on us? We are here now because of short term greed and not enough controls to keep it in check.