I've got my own solution to the Real Estate and financial crisis ... I'll save that for another day.  There are two components to the crisis that are at least being talked about.  This is one reason for my recent stock trades.

THE UPTICK RULE -  This basically means that in order to short a stock it must be shorted at a higher price then the last trade.  There is a good opinion article on this at The Street.com (warning it is lengthy and goes into the topic pretty deep).  The basic reason is that it helps slow down a rapid decline in the price of the stock.  As the market always battles between fear and greed this helps put the breaks on the market when fear is running rampant.  This allows sanity to return to the market.

In the terms of the banking industry this will greatly help the banks.  Banks can only lend based on the amount of capital they have.  Banks having more capital means more lending.  Isin't this what we want and what we need?  The uptick rule was eliminated under the Bush administrations watch on July 6, 2007.  I'm not saying this caused the financial crisis, but it exacerbated it.

MARK TO MARKET ACCOUNTING - People who blame the banks and said they did it all to themselves don't understand the effect this change had.  Banks certainly made a lot of bad decisions with their lending and investment practices, but this thing made it a whole lot worse.

This is a complicated topic and difficult to explain.  I'll use parts of the explanations from Wikipedia

Related to the entire discussion is the effect of the issuance of Financial Accounting Standards Board (FASB) Statement No. 157 “Fair Value Measurements”,[2] which became effective for entities with fiscal years beginning after November 15, 2007.Sometimes, there is a thin market for assets, which trade relatively infrequently - often during a economic crisis. In these periods, there are few, if any buyers for such products. This complicates the marking process.

Let me explain this in two examples to the AR community:

A homeowner is making their mortgage payments on time and is an excellent credit risk and has a ton of equity in their home.  The value of the payments to the bank can have a future cash value to the bank of let's call it $100,000.  However, in todays market nobody wants to buy a mortgage backed security.  This may mean that the bank has to mark the loan on it's books at $30,000.  This is a paper loss of 70K, however it means that the bank will be able to loan less money for Real Estate, cars, appliances etc.  Why don't we fix Mark-to-Market accounting at least temporarily in this marketplace?  If this was done, we wouldn't need to give the banks as much of our tax dollars.

Let's assume that individual consumers and families had to run our finances with Mark-toMarket accounting (MTM).  I love my home and my wife and I have no plans to sell it.  I'll be conservative and say that its worth $250,000 in a normal market.  MTM would say quick you have to sell your house in the next five minutes how much can you get?  I'll say that figure is $200,000.  Now as individual this lowers my net worth by $50,000.  This could cause the interest rate on my credit cards to go up from a high of 12% to 25% because I'm a greater risk with lower net worth.  They could also cut my credit lines down and eliminate my ability to buy anything new.  This is a great analogy for what would happen if these standards would apply to individuals.

The fact that congress is holding hearings tomorrow to address this issue is one reason stocks rocketed up today.  I'm not sure if NAR has taken a position on this issue but it should take one.  Write your congressman and weigh in on the issue.  While the link is not as clear as a $8,000 credit for new homebuyers it will make a difference.

Both the uptick rule and the mark to market accounting are getting a ton of press coverage today.  The biggest reason the stock market went up was because the market is hopeful these issues will get fixed.

I wish I could of wrote this post better, but it's very freaking complicated.  I'm also not that great of a writer, when you are a excellent oral communicator people assume you can write.  Thanks for reading.