I think that some sensible risk rules must be applied. I get the feeling that risk managers in the industry had some sense this mess was out there, but that no one listened to them.
This happened with S&Ls, Junk Bonds, The Dot.coms and the next will be?
If I were Bush, I'd ask the egg heads to deconstruct and then pin the map at the place the tipping point occurred, and then use that to establish rules and incentives for diversification for industries.
Given today's computing power, I wonder how hard it would be to produce periodic reports(*) listing all of the hard assets that back particular securities, along with the percentage of each, and then figure out the total value of securities backed by each asset. I would expect that there would be some hard assets which aren't backing up much of anything, and others that are backing up an amount which would vastly exceed even the most optimistic estimate of their worth.
(*) The reports wouldn't be printed on paper, but would be generated 'virtually' as input to the process that would evaluate is being backed by each hard asset.
I really don't mind paying a corporate CEO $100M if he does a good job running a thriving company. I most emphatically object, however, to the fact that the Fannie/Freddie executives are making lots of money while shafting taxpayers. IMHO, the bailouts should take the forms of loans secured by the flesh of the CEOs involved.