Read this Wall Street Journal interview with Anna Schwartz, a 92 year-old economist who has some real, honest , and unbiased wisdom about the financial system. This may be the best analysis of the current climate that I've heard or read. She makes some good points about what regulators should be focusing on and calls for leadership among those in leadership. she calls for leadership that can make logical, predictable decisions that are hard but best for the system and long run. Here's a quote from the interview.
"I think if you have some principles and know what you're doing, the market responds. They see that you have some structure to your actions, that it isn't just ad hoc -- you'll do this today but you'll do something different tomorrow. And the market respects people in supervisory positions who seem to be on top of what's going on. So I think if you're tough about firms that have invested unwisely, the market won't blame you. They'll say, 'Well, yeah, it's your fault. You did this. Nobody else told you to do it. Why should we be saving you at this point if you're stuck with assets you can't sell and liabilities you can't pay off?'" But when the authorities finally got around to letting Lehman Brothers fail, it had saved so many others already that the markets didn't know how to react. Instead of looking principled, the authorities looked erratic and inconstant."
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