Things went from bad to worse this week, with two major investment banks floundering and a mega-insurer becoming a ward of the State. All of a sudden, naked short-selling is getting the heave ho, as an industry built on greed finally saw that the well does in fact, run dry.

While the “geniuses” on Wall Street have played their self-made casino with monopoly money, when the curtain got pulled away, it was the Fed stepping in with real dollars, your tax dollars, to stop the games. The question is- and we haven’t seen it yet- is what strings will be attached to the bailouts.

When the Fed pumped money into banks and cut rates, they didn’t have the guts to demand lower credit card interest rates, or a moratorium on foreclosures. Nope, they didn’t ask for anything back. That’s not capitalism at all folks, that’s socialism with the State taking care of the uber rich.

Business Week has an article saying that we’re headed back to regulation, the question is what kind of regulations?

The 30-year era of deregulation came to a sudden and surprising end on Sept. 16. Late that evening the Federal Reserve extended $85 billion to take an unprecedented 80% stake in American International Group (AIG) in order to save the floundering insurance giant. Less than two weeks earlier, Treasury Secretary Henry M. Paulson Jr. had announced that the federal government was taking over Fannie Mae (FNM) and Freddie Mac (FRE), the colossal mortgage agencies. Suddenly the U.S. financial sector could not survive without government help.

Since the long-ago days when Jimmy Carter was President, regulation has been a dirty word in Washington. Politicians of both parties vied to see how much of the economy they could free from the oppressive yoke of government control. The deregulation movement started when Carter signed the Airline Deregulation Act of 1978. Later, as it spread from energy to trucking to telecommunications to financial services, the rallying cry was the same: Less regulation, more growth.

But the implosion in financial services—until recently seen as the shining example of U.S-style free market capitalism—is the definitive sign that deregulation has lost its allure. In areas ranging from food safety to airlines to trade, increased government supervision is becoming acceptable to business as well as to voters. “Over the past couple of years, the mood has changed,” says Chris Waldrop, director of the Food Policy Institute at Consumer Federation of America. “What’s possible has expanded.”

The Candidates Weigh In

Indeed, both consumer and industry groups have come out in favor of giving the Food & Drug Administration stronger authority to monitor food safety. The shift toward reregulation is reflected in the Presidential campaigns. Back in March, Senator John McCain (R-Ariz.) said: “I’m always for less regulation” and referred to himself as “fundamentally, a deregulator.” But in a Sept. 16 speech the Republican nominee adopted a far different approach: “Under my reforms, the American people will be protected by comprehensive regulations.” On the same day, the Democratic nominee, Senator Barack Obama, (D-Ill.) who has argued much more aggressively about the need to bolster regulation, stepped up his rhetoric as well: “It’s time to get serious about regulatory oversight,” he said.

Is It the Dawn of the Reregulation Era?.

Read the whole article, and you never quite get a feel that anyone has a real clue on where to start. Neither candidate seems to have a background in Economics or an understanding of how tough we really need to get to bring some discipline back to the capital markets if we want them to operate the way they were supposed to.