I have to hurry so I can catch a plane to Orlando to attend an academic conference, but some quick thoughts on the next couple of days before I leave. The solution to the current financial crisis is becoming more clear each day. Bipartisan support seems to be coming around to a recapitalization option where the government buys preferred stock in failing banks to provide capital and a return to the taxpayers (certainly Soros, Wynn, Trump, Buffet and other financial businesspeople from both sides are calling it the preferred option). The banks keep the loans and have to deal with, but they then have the money and time to deal with it correctly. It appears the only bill that will really placate main street by demonstrating a workable path is:

1. Buy preferred stock in failing banks, not buy the actual loans
2. In exchange for purchasing the preferred stock, executive salaries and bonuses are limited until everything is repaid in full to the taxpayers
3. Eliminate mark to market accounting for bank institutions

If the solution over the next couple of days ends up being the same package with a few more christmas presents in terms of tax breaks and other subsidies, then we will see just how shallow out politicians have become. Republicans took a hit for implying that Pelosi's speech had caused some to switch votes. If politicians will switch votes just because a few goodies were added to the bill, then we will watch as congressional approval falls to 0%.

It has been disappointing at how little leadership has emerged over the last couple of weeks. Democratic leadership (Reid and Pelosi) started off by saying they have no idea what to do and we will deal with it when they get back from vacation (it is obviously easier to blame everyone else versus come up with a solution). Bush then stood up and said it needed to be fixed, but did his usual power trip and had all decision making fall under one person. The two presidential candidates stepped in and slowed things down, but only drove minor changes to the original Bush proposal. Now we get to see who steps up and actually fixes the problem and provides a solution that everyone can agree on.