01/20/2009 03:51 pm ET Updated May 25, 2011

What the Obama Team Has Not Yet Decided

the announced policies of the Obama team are not adequate. I don't mean simply that the stimulus plan i not big enough. There's time to build that up.

Rather, In the past few weeks, the credit crisis took a turn for the worse that is not fully appreciated. It showed up msot dramatically in the losses Merrill Lynch reported--and that forced Bank ofAmerica to go begging to the federal governmnet for help.

Was B of A foolish to buy at those prices? Yes. But what the Monday morning quarterbacks don't realize is that the situation deteriorated rapidly after they made the deal. And this is now what the Obama team must handle.

What happened? Defaults are stil high, lost jobs and incomes are making them worse, and the value of those mortgage backed securities, which are now the heart and soul of banking--and the deep mortal wound as well--keeps falling. Few if any ahve fully understood or anticipated the ongoing dangers.

President Obama moved with haste and intelligence when it became clear that a new stimulus package of substantial size was needed. He took care to add tax cuts, which is a pity. But this will be his style. Give a little politically to get something.

But more is now necessary. Many economists turned up their nose at Paulson's first instinct to stabilize the mortgage-backed obligation market by buying up bad assets. Just give them capital, the right and left argued with vehemence and a fair degree of arrogance. But if the value of the assets keep falling, more capital just goes down a hole.

As of today, we hear the Obama team is talking about a plan to stabilize the market by buying or insuring bad assdets. We need it quickly. But we haven't heard enough about how to stanch the mortgage defaults, which are dialy making the stabilization of the credit markets almost impossible. What's the Obama plan?

We also have not heard enough yet about re-regualting these entities. Granted, that can wait a bit. I'd be more comfortable if some "anti-dergulationstis" were on baord. But the mortgage default program--though difficult to implmenment under any cricusmtances--needs immediate attention.

This economic team is very capable but they are hardly visionaries. The leaders of the team--notablu Summers--supported deregulation strongly in the 1990s. They were at one wiht Greenpans market philosophies. None of them warned about how serious the dangers were early on. None of them insist Greenspan look more closely at shdow banking. They have been slow to come up with a defaults solution. Why?

But we need a lot of policy in the first few weeks of the administration--not just the policies that are now widely accepted. Here's hoping the Obama team has a few who can stick their necks out.