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The post-bailout agenda

For starters, Congress must admits its mistakes in creating a housing bubble.

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For Congress, spending billions to buy up Wall Street's dodgy mortgages may be the easy part. The next act requires lawmakers to respond to public anger and prevent America's economy from falling into another giant credit hole. Where to start? With Congress itself.

House Speaker Nancy Pelosi says Congress bears no blame for the current crisis. And in a Thursday night TV speech, President Bush cited a large influx of foreign money as a primary cause for American's financial excess.

Such political deflection doesn't bode well for what should be the biggest rethink of the government's role in financial markets since the New Deal, or even since Alexander Hamilton set up the first central bank.

Congress too often fails to find a balance between letting business regulate itself and forcing a government's hand on markets. Two mistakes stand out from this crisis and call for correction:

One is the 1999 repeal of a Depression-era Glass-Steagall law that prevented the financial institution from both lending money and investing it. The repeal recreated the same conflict of interest and casino-like culture of greed that led to the 1929 market crash. It also led to companies becoming "too big to fail," forcing government bailouts.

Congress's other big mistake was creating the impression that government will always support the easy buying of houses and help keep home prices rising.


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