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Why the AIG bailout isn't enough
Will it take new regulations to restore confidence on Wall Street?
T

he government’s “rescue du jour” prevented the near-failure of insurance giant AIG, said The Philadelphia Inquirer in an editorial, but watching the feds “scramble from forest fire to fire” is scaring investors and consumers. A “more systematic solution,” such as creating an agency to buy and resell troubled mortgage assets, would do more to stave off panic.

Bailing out one company after another will only work “until Washington runs out of cash,” said The Washington Post in an editorial. The key to restoring order is devising a “more predictable and transparent” way to handle Wall Street’s meltdown, “along with new rules to help prevent a repeat performance in the future.”

Regulations passed to prevent a repeat of Enron helped create this mess, said Zachary Karabell in The Wall Street Journal. AIG and Lehman Brothers and Bear Stearns only buckled because post-Enron rules on reporting assets made mortgages and derivatives look worthless when they really weren’t. The problem isn’t too little or too much regulation—it’s “bad regulation.”

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