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I just read an article from The New York Sun that provides a very believable and logical explanation for the recent stock market run. Obviously there were a few other conditions, but the main problem is the credit crisis. A former SEC official, Lee Pickard, provides an easy to understand explanation.

He says that there are standing rules, provided by the SEC, which govern net capital. The rule is, in a nutshell, that a company's debt-to-net capital ration can't be higher than 12-to-1. But back in 2004, in response to a move by the European Union, the SEC created a voluntary exemption to the established limits. The exemption was for brokerage firms with capital of at least $5 billion, allowing them to have less restrictive debt-to-net capital ratios.

As it turns out, 5 companies volunteered for the program, each having a valuation of more than $5 billion. Who were the companies? Merrill Lynch, Morgan Stanley, Bear Stearns, Lehman Brothers, and Goldman Sachs - And look what happened... Lehman Brothers, Bear Stearns, and Merrill Lynch collapsed, and Goldman Sachs and Morgan Stanley took huge hits, opening the door wide to the possibility of their being bought out - even as I type this, there is speculation that Morgan Stanley is in negotiations to merge with Wachovia. It's possible that Sachs and Stanley may pull out of this, but their performance has added to the growing panic.

Will the SEC consider changing their stance on regulation? Probably not. Of course, that may change come November, but for now, the West is still Wild.