With the House of Representatives voting down the bailout package and the Dow plunging some 700 points yesterday, it is time to rethink things. Here are some ideas to add to the next bailout package.

Capital gains. Most people have seen their portfolios decline ten to 15% over the past month, if not by much more. Why not suspend (or eliminate) the capital-gains tax rate, currently at 15%, until the crisis passes? It would inject billions of capital into the markets but would not require the U.S. Treasury to write any checks. It would erase billions in losses, as people recalculate their portfolios based on the tax cut. What about Uncle Sam’s lost revenue? The revenue loss would be minor (capital-gains tax generates little). Besides, if we are debating the most effective means for government to put money into the markets, letting investors keep more of their money rather than giving it to executives at failing banks, is more efficient. Also, the tax cut eliminates the “moral hazard” of bailing out bad behavior.

Ditch “Mark to Market” accounting rules. Artificially reducing the value of bank assets (bundles of securitized mortgages) simply because the market prices of those bundles has fallen doesn’t make sense in the current market environment. Indeed, these rules seem to accelerate and spread panic. Sober officials should remember that the vast majority of mortgages–even subprime ones–are actually performing. People are paying as agreed. And, secondly, marking down mortgages 90%  when the underlying value (the land and the home) have declined in the real-estate market less than 15% makes no sense.

Revoke Sarbanes-Oxley. This showy over-reaction to the Enron mess has saddled public companies in the U.S. market with a welter of unnecessary regulations–and driven a lot of new offerings to London and Hong Kong. The New York Stock Exchange is no longer the world’s leading exchange and is now also one of the least innovative. To bring money back into the U.S. markets, from which it has fled since 2001, we need to return to pre-2001 rules.