We're still here

The Fed is clearly scrambling and the market knows it: cutting rates when you've already effectively pulled the plug on the banking system doesn't change the fact that the patient is already dead. Consumers know it, too: they've cut back sharply on spending as the stock market points out the direction for employment. What happens next, economists say, is the nationalization of most, if not all, the world's financial system.   This realization has created a certain degree of, dare I say, calm in financial markets. Yes, they're still falling, but the panic seems to have been replaced by resignation. Coordinated rate cuts may have had only a psychological impact, but psychology is all we have at this point. As an indication of a slight recovery of faith, spreads between interbank rates and Treasuries narrowed slightly. Perhaps now we can stop flailing and start addressing the task at hand, completing the deleveraging of the global economy, taking stock and moving on. One thing that seems clear is that the US economy, if not the global economy, will not improve until US home values stop falling. Some government effort should probably now be directed there.   As economists around the region kick the tires amid the raging storm, an increasing number are giving the UAE the thumbs-up. With banks still well capitalized and many still majority-owned by the government, it will be much easier to shore them up with the government's still-ample stores of capital. And fortunately, that is still something in ready supply. A sharp correction in property prices could precipitate a crisis, but a mild decline would actually be welcome. And whether intentionally or not, a broad effort appears to have been underway to beef up the vitality of the financial system. Dubai's efforts to wring the excesses out of its property market ? particularly off-plan sales ? came not a minute too soon. And the merger a year ago of Emirates Bank and National Bank of Dubai now seems particularly farsighted. We can look forward to consolidation in the finance sector, starting with Amlak and Tamweel. Speculation is mounting that Abu Dhabi Commercial Bank and National Bank of Abu Dhabi may be headed to the altar.   While a danger remains that it could be drawn into the conflagration, the UAE is still seen as a refuge from the global financial storm and authorities need to capitalize on that - and fast. As markets have demonstrated, they key for regulators is to get ahead of the crisis, not respond to it with piecemeal action. Saying all is well doesn't work, even if all is well. All is well until it isn't. A concerted and publicly visible effort should be made to beef up banks' balance sheets before they run into trouble. And while the tendency will be to clamp down on financial markets and their development, the more urgent need is to push ahead on improving the financial heft of Gulf capital markets, particularly larger and more internationally respected centers such as Dubai and DIFX. This will help quickly fill the hole in financing that the crisis will leave and find ways to channel the region's wealth into job creation. This is not the time to leave the region's boom gasping for air.