It’s easy to talk about problems … it’s tougher to come up with solutions. I have seen a lot of finger pointing of who did what to take advantage of whom but none of that is solving anything. So far I have heard very few credible solutions being suggested. Okay - that means that I am not accepting the government bailout ideas that certain politicians have offered up. I didn’t like the Fannie / Freddie strategy or the Fed dropping interest rate moral hazard. Tightening lending standards didn’t work out too well, did it? Free market capitalists might want to just let investors and homeowners take their lumps. I have been guilty of making those kind of proposals here as an alternative to just caving in to crappy ideas being offered by others. But that is not good enough. If we let this run its course, we potentially risk a meltdown far more extreme than Cramer portrayed last week.

No one likes a naysayer. So I am challenging the best and brightest minds in academia, politics, and financial markets to a brainstorm competition. If it’s not already being done - the Congress or President Bush or whoever should create a panel. I hate to call it a “Blue Ribbon” Panel because their results haven’t been so great and that’s only after you get past the complaints about conflicts of interest in their recommendations or their politicizing of the issues. So call it what you want but it’s time to get moving on evaluating the merits and consequences of a wide range of solutions. And we shouldn’t just pick the obvious ideas to think through - this is not a normal problem - it probably won’t have a simple solution.

I’ll start with my own crazy idea… let’s breakdown the CDO’s. If they went together to be securitized, they hopefully can be broken apart. There’s a lot more to my idea but I’ll spare you the details until someone that cares wants to hear them. The main concept is that we need to isolate the parts of the CDO’s that are causing us to panic. We need to be able to measure the size of the problem and not let the risky tranches sacrifice the higher quality assets that are included in the CDO. I realize that this is similar to Merrill Lynch’s attempt to sell off the pieces of the Bear Stearns Fund but if there is a systemic solution I am more confident it might work.

Regardless, if you don’t like my idea - come up with your own and communicate it. One estimate suggests that there is $2.5 trillion in subprime, Alt-A and jumbo mortgage debt at risk. Today, global stock markets lost about that much value in one day.