French President Nicolas Sarkozy said the following at the World Economic Forum at Davos today...
"We are not asking ourselves what we will replace capitalism with, but what kind of capitalism we want?" he said.
"We must re-engineer capitalism to restore its moral dimension, its conscience,"
Ok, he's got the right idea here. Just because we hit an economic downturn does not mean we should start pushing towards socialist policies. In fact, moving away from such policies seems to be working in other places.
Now, what we need is not more regulation, but "good" regulation. We need current regulation to be simplified, clear, and transparent. The more you convolute something like this, the more loopholes you create for those who don't want to play by the rules to worm their way around the regulations in place. Both of our political parties seem to back regulation that apparently is too clouded in legalities that loopholes seem to be at every turn. Make it simple, make it clear, and make it so there is no doubt about what you are trying to accomplish.
This also naturally reduces and limits the amount of regulation you can implement, which is conducive to a well-oiled capitalist economy. You can only go so far without arousing protest from investors, businesses, banks, and the public at large (who probably does not understand a lot of the regulation to begin with, I know I have problems understanding some of the regulations I've looked up).
Granted, I would prefer minimalizing regulation, but since I have to play within the system (let's face it, most good revolutions do not happen overnight...unless you're talking Eastern Europe in 1989, but I digress), let's start by simplifying regulation first, then we can talk about what (if any) regulations are really necessary.
Also, taxing banks and big business as punishment will not be conducive to anything positive for the economy. If you thought big banks weren't lending before, watch what happens when you start penalizing them. If other states starting pulling moves like the state of Oregon just decided to do, you're going to see the leaders and drivers of free enterprise and industry start "going Galt" in huge numbers.