Author: Stephanie Dhue, Correspondent

The most certain thing about the massive housing bill passed by the House today is that it will be revisited. The authority given the Treasury to backstop Fannie Mae and Freddie Mac expires in 18 months. Tom Stanton who wrote a book in 1991 with the title “State of Risk: Will Government-Sponsored Enterprises Be the Next Financial Crisis?” says the regulatory framework for the GSEs needs to be as strong as it is for commercial banks. Under this bill, it’s not.

In fact, there is a need to massively overhaul the entire financial regulatory system. Treasury Secretary Henry Paulson has made some recommendations and hearings have begun, but this process will likely take years.

Of course, if lawmakers were really on top of the situation, and had reformed Fannie and Freddie years ago, we may have avoided the need to pass this “emergency” legislation.

While this blog is usually reserved for entries with a business angle, I was compelled to write something a bit different this time because of what happened on my family vacation. We spent the week at the beach. On the drive there, my seven year old daughter warned my husband not to wear his red bathing suit, "because red attracts sharks, Daddy." We chuckled at her warning. "Don't worry," I told her, "sharks feed at dusk and Daddy won't be swimming then." But he encountered another, perhaps less publicized danger on our trip. There was a hurricane off the coast that caused the ocean to be especially rough. My husband and a friend decided to take our kids boogie boards into the ocean. My husband somehow got caught between the board and the wave. He says he felt his neck strain and heard a popping noise and realized he couldn't climb out of the surf. Instead he crawled as far as he could before lifeguards came to his rescue. They braced his neck, strapped him into a back board, and sent him by ambulance to the nearest hospital.

The Securities and Exchange Commission is not the sexiest beat. Say SEC and many people think of the South Eastern Conference; say SEC fast and it can mistaken for the FCC (Federal Communications Commission). But what happens at the Commission (or doesn’t) can have a real bottom-line impact on the investments of millions of Americans.

With the bailout of Bear Stearns and an emphasis on beefing up the regulatory authority of the Fed over investment banks, investor advocates are worried the Securities and Exchange Commission is ceding its authority to the Fed. SEC Chairman Christopher Cox says his agency will now have greater ability, not less, to see what’s going on at commercial and investment banks. Former SEC Chief Economist Lynn Turner says the SEC should have realized that Bear Stearns was taking on way too much short term debt and using too much leverage and done something about it. Instead, the SEC put out the word that the investment banks were well capitalized.

President Bush sent the Colombia free trade agreement to Congress in April, under what are called “fast-track” rules. The move was meant to force Congress into an up or down vote on the agreement within 90 days. But instead, led by House Speaker Nancy Pelosi, the House voted to void the timetable, with a 224-195 vote. Now it’s unclear if the agreement is not ratified in this Congress that it can be ratified at all.

Stanford Group Company trade analyst Joanne Thornton says the agreement could pass in a lame duck session of Congress. Some lawmakers doubt there will be a lame-duck session, but that’s not unusual either. There is resistance to a lame-duck session, until lawmakers don’t get their work done and come back to finish things off after the election. According to the Congressional Research Service, it has happened 16 times since 1940, most recently in 2006. While a lame-duck session can be used to avoid controversial votes before an election, oftentimes lawmakers punt those issues until after the new President and Congress are seated.

What’s happening now in the oil markets reminds me of what happened in the housing market after the tech bubble crashed. There were some fundamental changes that were happening in housing: baby boomers buying second homes for retirement, an increase in immigration, and changes in the tax law. But there was also excessive speculation, with TV shows like “Flip this House” marking the phenomenon. Yes, land, unlike stocks, is a limited resource. But as we are learning with the housing crash, the fundamentals did not support the rapid price run-ups.

We don’t always get time to air an interview in its entirety. It can be an agonizing process deciding what to keep and what to leave out. Today, I didn’t have much time to agonize, so a couple of newsworthy questions were left out. I asked House Financial Services Committee Chairman Barney Frank about the FBI’s operation “Malicious Mortgage” and also about Treasury Secretary Paulson’s call for greater powers for the Federal Reserve to regulate. To me, these ideas fit hand and hand. (Unfortunately, they didn't fit into the time allotted to the interview.) Perhaps if someone was actually checking the loan documentation, or requiring that documentation in the first place, the portfolio funds would not have held these funds and there were be no reason to hide them from investors.

Some people argue that you can’t regulate ethics and some people will cheat. This may be true, but tighter reigns on the players in the real estate and mortgage market may have save a lot of pain.

FCC Chairman Kevin Martin will soon be circulating a proposed merger agreement between satellite radio providers XM and Sirius. The firms have agreed not to raise prices for three years, offering a smaller package, and opening up its manufacturing so there is competition for satellite radios. But it’s still a bit of a nail biter as to whether this will have the votes to pass.

The Securities and Exchange Commission gained new regulatory power over credit rating agencies last year. Today marked the first time the Commission has proposed new rules for the agencies. Clearly, these rules won’t be the last. The business model of the credit rating agencies presents a conflict of interest. The companies that issue debt pay for the rating. In the case of sub-prime mortgage backed securities debt, the conflicts went further. The rating agencies made a business out of consulting with the debt issuers to help the debt reach a certain rating. The SEC has proposed banning this practice.

Government-backed coal-to-liquids projects date back to the 1940s. They have all failed to create a commercial market for synthetic fuel. The biggest obstacle is cost. The soaring cost of a barrel of crude may take care of that. I've heard estimates that coal-to-liquid synthetic fuel is cost-competitive once oil reaches from $50 to $75 a barrel. The other obstacle is the environmental impact. To minimize the environmental cost of coal-to-liquid, plants must be able to capture the carbon emissions. People involved in the industry say the technology is available to do this. The captured carbon can be either stored or used to enhance oil recovery. But there are doubts carbon can be safely stored, and the capture technology has yet to be proven on a commercial scale.

There’s a reason that the law making process is compared to sausage-making – you don’t really want to see how it’s done. A bill with the best of intentions can become a grab bag of goodies for anyone with the clout to ask.

The Climate Security Act includes provisions designed to win support, including, money for job re-training (unions), money to fund wildlife restoration (environmentalists), and subsides for manufacturing industries that compete overseas (steel, aluminum).