Washington is deserted in August, so demands for a political response to the financial-market debacle have been muted. Rest assured, this will change. The problem will not be dealt with by next month - things could easily get worse before they get better - and some appealing suspects are just asking for a regulatory beating. Enron and the other corporate scandals begat Sarbanes-Oxley. What will the subprime mortgage meltdown bring forth?

Observers of the subprime mortgage business (not counting those who work for it) had been predicting a breakdown for quite a while. Regulated banks do little if any such lending. Bank affiliates or independent mortgage companies have built the business - and they are, respectively, lightly regulated or virtually unregulated. They lent eagerly to borrowers of limited means, often on patently reckless terms (initially low "teaser" ratesswitching to expensive variablerates; interest-only loans; loans whose principal increased over time). Everything was premised on perpetually rising