Some investors are blaming the current credit crunch and market turmoil on everything from predatory lenders and overly optimistic homebuyers to greedy hedge funds that took on way too much leverage. I think it's a bit too late to play the blame game.

Instead, we should be focusing on a solution.

The Fed's Options
For starters, I think the Fed should seriously consider turning on the spigot and lowering the Fed Funds rate. But isn't that only going to lead to more speculation? Probably to some degree, but the simple fact is that businesses need liquidity to keep paying the bills. They also need funds in order to keep investing and building out new products and to hire new employees.

In addition, the Fed has the option to "jawbone". This means the Fed can speak to investors and consumers and let them know it will be vigilant in helping provide liquidity - again whether its lowering rates or buying back bonds in order to inject money into the system. To its credit, the Fed recently said that it did buy some $19 billion in bonds, but it could to do more. I would argue that Bernanke needs to get on TV and reassure these markets personally.

Beyond the Fed
Our politicians have to do their share, Republican and Democrat alike. I think they need to come out publicly and say that they are either going to lower taxes, either personal or corporate, or provide some incentives for investing in businesses.

Specifically, they could reduce the capital gains tax rate, or providing increased incentives for making charitable deductions, or provide some relief for employers when it comes to payroll taxes. Additionally, they could be encouraging foreign investment either through tax breaks or possibly through the sale of government land at a favorable price.

Finally, the politicians should be seeking a serious alternative to foreign oil and encouraging companies to build refineries and new drilling platforms in the interim. In short, I think our elected officials should stop the political infighting and do something - anything.

The Bottom Line
The Fed, the politicians and the public are all in this mess together. Any solution is going to require cooperation and coordination between all three.

For a one-stop shop on subprime mortgages and the subprime meltdown, check out the Subprime Mortgages Feature.

Looking to cook up a market-stomping stock portfolio? Check out our FREE report "7 Ingredients to Market Beating Stocks" and get started right now!

Related Articles
  1. Products and Investments

    There's a Reason They're Called Junk Bonds

    The closing of Third Avenue Managemet's Focused Credit Fund is a warning to investors and advisors. Beware the junk.
  2. Options & Futures

    What Does Quadruple Witching Mean?

    In a financial context, quadruple witching refers to the day on which contracts for stock index futures, index options, and single stock futures expire.
  3. Stock Analysis

    Tribune Media: An Activist Investment Analysis (TRCO)

    Learn more about the breakup of Tribune Company, once a powerful newspaper and broadcasting giant, and the role of activist investor Cliff Robbins.
  4. Options & Futures

    4 Equity Derivatives And How They Work

    Equity derivatives offer retail investors opportunities to benefit from an underlying security without owning the security itself.
  5. Stock Analysis

    Air Products and Chemicals: An Activist Investment Analysis (APD)

    Learn about the productive, and uncommonly friendly, activist investment made by Bill Ackman into Air Products and Chemicals.
  6. Stock Analysis

    Analyzing Altria's Return on Equity (ROE) (MO)

    Learn about Altria Group's return on equity (ROE) and analyze net profit margin, asset turnover and financial leverage to determine what is causing its high ROE.
  7. Investing News

    Icahn's Bet on Cheniere Energy: Should You Follow?

    Investing legend Carl Icahn continues to lose money on Cheniere Energy, but he's increasing his stake. Should you follow his lead?
  8. Stock Analysis

    Analyzing Google's Return on Equity (ROE) (GOOGL)

    Learn about Alphabet's return on equity. How has its ROE changed over time, how does it compare to its peers and what factors are driving ROE for the company?
  9. Investing News

    Is Buffett's Bet on Oil Right for You? (XOM, PSX)

    Oil stocks are getting trounced, but Warren Buffett still likes one of them. Should you follow the leader?
  10. Investing

    3 Things About International Investing and Currency

    As world monetary policy continues to diverge rocking bottom on interest rates while the Fed raises them, expect currencies to continue their bumpy ride.
RELATED FAQS
  1. What is a derivative?

    A derivative is a contract between two or more parties whose value is based on an agreed-upon underlying financial asset, ... Read Full Answer >>
  2. What is after-hours trading? Am I able to trade at this time?

    After-hours trading (AHT) refers to the buying and selling of securities on major exchanges outside of specified regular ... Read Full Answer >>
  3. What is securitization?

    Securitization is the process of taking an illiquid asset, or group of assets, and through financial engineering, transforming ... Read Full Answer >>
  4. Can hedge funds trade penny stocks?

    Hedge funds can trade penny stocks. In fact, hedge funds can trade in just about any type of security, including medium- ... Read Full Answer >>
  5. Are hedge funds regulated by FINRA?

    Alternative investment vehicles such as hedge funds offer investors a wider range of possibilities due to certain exceptions ... Read Full Answer >>
  6. Should mutual funds be subject to more regulation?

    Mutual funds, when compared to other types of pooled investments such as hedge funds, have very strict regulations. In fact, ... Read Full Answer >>
Hot Definitions
  1. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  2. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  3. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  4. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  5. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  6. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
Trading Center