Soros on bubbles

http://www.nybooks.com/articles/21792
"Some are suggesting that margin requirements for commodity transactions should be raised. Margin rules determine how much in cash or Treasury bills must be deposited when buying or selling a contract. An increase in margin requirements would have no effect on the commodity index buying strategies of ERISA institutions because the transactions are in cash, not on credit. But such an increase could discourage speculation by investors other than financial institutions. Varying the margin requirements and minimum reserve requirements for loans by financial institutions are tools that ought to be used more actively, as market conditions warrant, in order to prevent asset bubbles from inflating further. That is one of the main lessons to be learned from the recent financial crisis."

This is an idea that needs more exploration. I would argue that we DID use margin requirements actively, to PROMOTE the bubble. When we allowed downpayments to get to zero, and then allowed debt to income ratios to get really high, we basically lowered the margin requirements on the real estate market dramatically. Fundamentally, that is the root cause of this crisis. No one can make the margin calls. (i.e., pay off their mortgages.)