Where are the markets headed and what needs to be done? Is what Wall Street and Washington want, what the markets need?

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This columnist has followed the recent turbulence in the financial markets with curiosity, a critical eye, and a perspective tempered by over four decades of history.

Your reporter has chronicled this week's events in two articles and a poll:

http://www.opednews.com/articles/MORE-BIG-CORPS-ON-AUCTION-by-Constance-Lavender-080917-938.html

http://www.opednews.com/articles/2/Global-Financial-System-Re-by-Constance-Lavender-080914-367.html

Poll:

http://www.opednews.com/Poll/How-much-faith-do-you-have-by-Constance-Lavender-080914-749.html

This writer has made three observations concerning the current crisis:

1.  The lack of a reliable and predictable mechanism for the orderly liquidation of failing US companies seems to have accelerated, not eased, investor nervousness. Without an orderly, predictable, and rational  process for liquidating failed businesses, volatility will only worsen.

2. A functioning, rational regulatory structure, adapted to new global finance realities and competent to identify risks before they threaten financial foundations may be a neccesary condition for the return of market stability.

3. And some entity constructed to assess, evaluate, and regulate new financial instruments---including their legality and potential for abuse---in real time might prevent future interruptions.

Some explanation and clarification is required: credit ought to be given where credit is due. Treasury Secretary Henry Paulson has been one of the few steadfast faces in the crowd over the past few months. Paulson is working under difficult circumstances to say the least.

With regard to the observation that there is currently no reliable and predictable mechanism for the orderly liquidation of failing US companies;  that function is currently being performed by a person or people (Paulson, Bernanke, Cox) whereas a mechanism or structure seems more rational.

Markets are in the midst of a complicated crisis, not at the bottom. Yesterday, Putnam Mutual Funds came under threat and there have been additional developments as well to be reported in a later column.

Markets are also in the midst of a US presidential election. Congress and the White House are vowing cooperation on a "bipartisan" measure to put a stop-gap in place.

Markets temporarily--that is yesterday---reacted positively to that news. Yet are the markets rational? Are the markets a good predictor of the future?

What is the wisdom of an emergency measure to placate a fluctuating, wildly gyrating financial system with an uncertain outlook?

Can the markets rely on the same Washington and Wall Street crowd to rescue a system they largely helped create?

There is not even agreement on the underlying causes of the problem: is it the mortgage market? Or is it the derivatives business?Is it a housing bubble, or a derivatives bubble? That matters alot.

Some candidates can't even decide whether or not there is a problem, let alone its causes and solution.

Elections are times for thoughtful reflection, hearing ideas, comparing philosophies, and taking stock of the stakes: what's at stake here? Voting is the civic process of acting on thoughtful deliberation. Is it wise to act in the fury of the political season?

The markets were up yesterday, who knows where they will be tomorrow. What the financial system needs is reform: deliberative, meanignful, thoughtful reform. What the markets do not need is just another thumb to stick into the dyke until another hole springs open.

Authors Website: http://www.blogger.com/profile/4236373

Authors Bio:
Constance Lavender is an HIV-Positive pseudonymous freelance e-journalist from a little isle off the coast of Jersey; New Jersey, that is...

In the Best spirit of Silence Dogood and Benj. Franklin, Ms. Lavender believes that a free country is premised on a free press.