The Ultimate Wall Street Nightmare

[Pressing-On]

It's not necessary to be pessimistic.

This Too Will Pass

Yes, the problems to be worked out this time seem scarier than most. And watching institutions like Bear and Lehman fail, and Merrill Lynch taken over just like that, doesn't inspire confidence.

But they're no different from other investment firms of the past that have paid the price for making too many bad decisions or taking too many risks in what is already a high-risk business.

How long all this will last is anyone's guess. But this a big country, with a highly liquid market and a still-strong economy. We'll get through it.

http://www.ibdeditorials.com/IBDArti...06370630265658

The Resilience of American Finance

The turmoil in the financial markets will reorganize the financial landscape. But this does not mean the financial industry will shrink dramatically. In fact the current crisis could well lead to an increase in the demand for financial services, as the world grapples with the need for new financial instruments, new risk management techniques, and the increasing complexity of the financial world.

We can argue about who was responsible for the overleveraging of the financial industry and the poor to nonexistent credit standards that prevailed in real estate. Certainly the regulatory agencies, including the Federal Reserve, should have sounded a warning. But the lion's share of the blame must go to the heads of the financial firms that issued and held these flawed credit instruments and then, in many cases, "doubled down" by buying more when their price was falling.

It is shocking that firms that withstood the Great Depression are now failing in what economists might not even call a recession. But their failure was not caused by lack of demand for their services. It was caused by management's unwillingness to understand and face the risks of the investments they made. The names of the players will change, but the future growth of the financial services industry is assured.

http://online.wsj.com/article/SB122152085270539225.html

Paulson's Courageous Action
By Larry Kudlow

In our capitalist system there are losers as well as winners. There are failures as well as successes. Harking back to the eminent economist Joseph Schumpeter, the old failures will be replaced by new enterprises.

Obama is on the campaign trail predictably charging that a lack of regulations during the Bush era is responsible for the current mess. But he’s misreading history. As George Mason economist Tyler Cowen wrote in the New York Times, one of the problems with the U.S. financial system is not a lack of regulation, but a lack of smart and effective regulation.

It’s easy to be overly pessimistic right now. But that negativism is not written in stone. Mr. Paulson talks about a housing and financial recovery in terms of months, not years. And I think he’s right. But his courageous action to put a stop to bailout fever will do as much as anything to move the nation toward recovery.

http://www.realclearmarkets.com/arti...us_action.html