So what will stop these people from continuing to gamble with borrowed money?

[closeupready]

By that I mean, if these derivatives are the real problem and not sub-prime mortgages, there is nothing as far as I can tell to stop these people from just taking the taxpayer money and continuing to do what has worked for them up to this point, and they know that if the house of cards collapses again, they can just continue getting taxpayers to shell out cash for their losses.

[MercutioATC]

1. The REAL issue (in the short term) is what will make them free up credit?

Answer: NOTHING

When the Fed expanded access to the discount window a couple of months ago, they did it to make money more available to banks (at very low rates) so the banks would lend that money. Know what happened?

The banks took that money and invested it in Treasuries, earning them a percent or so of guaranteed interest. Yes, they borrowed money from the government, turned around and invested it back into the government, and made a profit...and the credit market didn't loosen.

This is just one example of what I mean when I say that regulatory changes are a MUST. Throwing money at the problem really will not cure anything.

[dkofos]

2. Nationalize the banks.

[MercutioATC]

3. As a short-term stabilizing tool, that's one proposal...

Legislate and enforce more stringent regulations. Federalize the banks that need to be "bailed out" and allow solvent banks to continue to operate under the new regulations. As the economy recovers over the next 4-5 years, begin spinning off the private banks again.

[slipslidingaway]

4. K&R Nothing that I have read attempts to bring regulation or

transparency to the derivatives market.