especially about the SIVS

" In 1907 the failure of the Knickerbocker Trust Company of New York unleashed a perfect storm on financial markets. Complex cross-holdings between banks and inadequate safety margins threatened to bring down the entire financial system. The collapse of two brokerage houses involved in the failed corner of United Copper stock precipitated the crisis. Rumors that Knickerbocker was embroiled in the scheme started a run against the famed trust company, with lines of investors demanding the return of their money. Knickerbocker was forced to close its doors and its president, Charles T. Barney, resigned. He committed suicide shortly afterwards. The panic spread to other banks and trust companies, with depositors queueing to withdraw their savings and banks wary of supporting each other in case of further failures.
The market was saved by the leadership of J.P. Morgan, unofficial head of the New York banking community. There was no Federal Reserve in those days: the panic of 1907 would lead to its formation. Trust companies were particularly vulnerable to a run because they did not enjoy the support of a central clearing house. Morgan conducted a speedy review of the most vulnerable trust companies; his young assistant, Benjamin Strong, at times standing in their vaults counting boxes of securities. They identified which of the trust companies were capable of rescue and those who were beyond redemption. Drawing a line in the sand, Morgan browbeat his fellow bankers into providing a pool of funds to support the Trust Company of America — locking them in his library until they had all agreed to participate. The trust company was saved and the panic abated.
Benjamin Strong later became chairman of the Federal Reserve. If not for his untimely death in October 1928, leaving the Fed without strong leadership, I believe that the worst of the post 1929 banking collapse would have been avoided. More than 10,000 large and small banks eventually failed, precipitating the Great Depression.
What we can learn from 1907 is the need for prompt action to identify the extent of the damage, the courage to make tough "triage" decisions about who should fail and who should be rescued, and strong leadership to force this through. Panic feeds on uncertainty. What the public and banking community need is a clear view of bank exposure to off-balance sheet SIVs — and exposure to counter-party risk in the multi-trillion dollar credit default swaps market. Attempts to sweep this under the carpet are likely to lead to further panics — and unnecessary failures. What we do not need is prevarication from Congress and attempts to postpone any action until after the November election. By then it could be too late.
Immediate steps should include restrictions on short-selling; banning SIVs and forcing banks to sell bad assets at a steep discount into a controlled entity similar to the Resolution Trust Corp., employed to clear up the S&L mess; and forcing all credit default swaps through a central exchange."