Reform is a word being thrown around a lot. I was talking with a few colleagues and inevitably, conversation turned to the economy. I realized something that is one of those "duh" it's obvious points that I have not heard much said about. One of the problems with the market over the past years is not capitalism per say but rather risk-less capitalism. In the world of small business, we practice a pure form of capitalism where the enterprise is privately owned and the risk is solely on the individual. What caused the mortgage "meltdown" was the removal of risk. Loans were written by "lenders" who lent no money. Those loan were then bundled and sold off not once but several times further removing the loan originator from the risk associated with bad decisions. There were questionable lending practices such as not verifying incomes etc. but the consumer was also to blame and the "meltdown " was inevitable. We all knew that housing costs had to correct and we got it in spades because of the risk removal going and with mark to market trading. So now with regulation threatening to strangle the free market, what should we do? To me the answer is simple we only need a little regulation here. Put the risk back in capitalism. Lenders should be required to hold a loan for a specified time frame before selling it off on the securities market. Fixed rate loans should be held by the originator for 5 years. ARMs should be held for a period of the arm plus 5 years IE. a 3 year arm cannot be sold off for 8 years. Now real money is at risk and lenders will be forced to be more responsible. Yes money will be harder to get but that is how it should be. Risk forces accountability which is exactly what has been missing.