This is all the more reason why the Obama Administration needs to do the following steps to improve financial system stability:

1. Tighten regulations on hedge funds, derivatives and credit default swaps by requiring actual liquidity backing to trade in these investment instruments. no controls on these “exotic” investment instruments was a huge reason why the stock market crashed in September 2008.

2. Increase the minimum margin requirements for trading in stock futures and commodities from 5% to 15%, with as high as 25% on critical items like crude oil, certain refined petroleum products, natural gas, certain foodstuffs, certain industrial metals and precious metals. Higher minimum margin requirements will keep out the “make a fast buck” speculators and result in far more stable price changes (no more rocketing up and down the price of commodities like what happened to crude oil in 2008).

3. Revamp the Sarbanes-Oxley Act to better balance new stock IPOs with accounting requirements. Sarbanes-Oxley as it is currently written has pretty much stopped all new IPO activity in the USA.

4. Reimpose the full provisions of the 1933 Glass-Steagall Act to get the banks out of the equities business. If you look at the 1987 stock market crash, note that because banks couldn’t directly trade in equities back then, they effectively became a de facto “economic backstop” that held up the US economy as the stock market recovered from that bad experience. If the Glass-Steagall was in place last fall our economy would likely have recovered a lot faster because the banks would still be standing, not be on the verge of collapse.

5. Force corporate officers that hold shares in their own company to hold it for at least a year before any stock can be sold.

Stock Traders Find Speed Pays, in Milliseconds