There are some burning questions that need to be asked about the recent economic turmoil. Now that the government has control over A.I.G., what does this mean and what do we expect over the next few months? Also, where is the government getting the money to help A.I.G.? Isn’t the U.S. already in deficit? What would this mean from a taxpayer’s point of view? Would we expect taxes to increase over the next few years?

At the end of all this, the actions by the Federal Reserve and the Treasury are likely to increase the deficit. They’re trying to solve big problems, which usually costs money. There are only two ways to get more money - raise taxes or print more. There is always a chance that the government will make money on the stakes it is taking in these troubled businesses, as it did when it bailed out Chrysler in 1979. But it’s not the most likely outcome.

The government is already running a significant deficit, and it is facing big future commitments, mainly in the form of Medicare. As nice as it would be if we could get rid of the deficit by cutting taxes, we now have 30 years of evidence suggesting otherwise.

You have to assume that there is more to come. The main cause of all these problems is the decline in house prices, which has led to a collapse in the value of mortgage securities. House prices almost certainly have further to fall. Relative to the fundamentals — rents, for instance, or incomes and interest rates — prices are still 5 percent to 10 percent too high, on average, across the country.

So you may ask who is to blame and what is the solution? This is not a partisan issue. Bottom line is that we need more serious government oversight. Regulators assumed the market would police itself. It didn’t. You can't have the fox minding the hen house.