Perhaps Roosevelt's most famous phrase is, "We have nothing to fear but fear itself." Today, we largely find ourselves in much the same situation.

That does not mean however that fear is not something to be afraid of. 'Fear means a loss of confidence.' People will only trade with each other, or give each other money if they have confidence that the other person will hold up their end of the bargain and/or be able to return the money. Think about it for a minute -- the root word for "credit" is the same as the root for "credibility."

Given that the financial instruments of today are so opaque and hard to understand, as we go through this deleveraging most institutions have lost faith in other institutions. They simply don't know exactly what the other guy has on his books and if it is going to blow up on him tomorrow, or next week or a month from now. Thus everyone is trying to hoard their cash.

Confidence is absolutely essential to markets, but most of the time we don't have to think about it, because it is there in normal times. It's sort of like air. When was the last time you thought about the ability to breathe?? However, take away the air for just one minute and it is all you will be able to think about.?

The bailout bill is first and foremost about trying to restore confidence in the system. It is not a perfectly devised plan -- far from it. The latest version is in many respects a worse bill than the one that went down to defeat on Monday. It has a ton of extraneous stuff in it that has little to nothing to do with rescuing the financial system before it turns blue.

Some of the measures have merit on their own, but are completely besides the point. My "favorite" of these is a $200,000 a year tax break for the manufacturers of wooden toy arrows. But there are two features in the new version that do have a bearing on the crisis: one good and one bad. The good one is the increase in the FDIC insurance limit to $250,000. This will stop "walks on the bank" where people have been withdrawing everything they have over the current $100,000 limit.? Those "walks" at least contributed to the timing of the demise of Washington Mutual and Wachovia. The increase in the limit will only catch things up for inflation since it was last raised in the early 1980?s.

The second provision is the relaxation of the "mark-to-market" rules. This is an AWFUL idea, in that it just tries to sweep the problems under the rug and hide them. It makes it more difficult for institutions to know what is on the other guy's books. It makes the system even more opaque. Allowing you to pretend that the stock you bought at $100 and is currently trading at $50 is still worth $85 or $90 does not make it so. If you presented a statement to your bank putting those shares up as collateral at a value of $85 would simply be fraud.

That is what this proposal is all about -- legitimizing a form of securities fraud.