Goals of a solution to the current financial situation

This is a reblog of a comment to the Roger Ehrenberg's recent article explaining some of the root causes of the financial market crisis

Terrific piece, Roger.

What should the goals of any solution to the economic downturn and credit crunch include? I've attached a few of the things I think are important:

1) Transparency: No closed doors and real discussion of the objectives, risks, and alternatives

2) Re-establishment of risk: Allowing risk premiums to be re-established and restoring the risk/ reward trade-offs of investing

3) Reduction in leverage: Juicing rewards with leverage is a game that benefits traders, not customers (they can lever up themselves prior to allocating assets to a portfolio). Through regulation, disclosure, and/or raising the cost of capital--make sure this leverage-induced brinksmanship goes away

4) Put all transactions on the books. A lot of effort goes into accounting gimmicry. Make all corporate assets disclosed on the balance sheet. Disclose liquidity (regulating all agents would be bad...PE and VC both legitimately invest in illiquid assets).

5) Buy assets at market value. If market value can't be determined, use different assets that can be valued. If market value makes firms insolvent, make sure they die quickly. Finding a bottom will get us back on the path to growth.

Originally posted as a comment by Vijay Goel, M.D. on Information Arbitrage using Disqus.