Stimulus package - ensuring efficiency and sustainability

The Senate is closer to signing of the stimulus bill, after a short hiatus of introspection and wrangling. Though one does feel that the package is spread out a bit too thin - in terms of areas it tries to cover - it never the less provides a much-need lever for trying to stem the current economic decline. Sceptics would question the relevance of another 850-odd billion 'stimulus package' when the earlier 700 billion kitty (TARP) did little to either ease money supply or contain fincnail sector turmoil! This could very well be true unless administration and execution of the package is done in a business-like fashion. Adding the money remaining from the TARP package, the government has a ~USD 1 trillion pool now to spark economic activity.

Despite all the goodwill and long term benefits that green energy spending and healthcare spending would bring, we probably cannot pull ourselves out of the rut unless there is targeted efforts at improving money supply. Government spending in infrastructure would drive some downstream activity in construction and ancilliary sectors; but this cannot result in sustainable business acticity unless the core issue of liquidity and money supply is addressed. We need to address the root problem for this - ongoing mark-to-market impairment on the balance sheets of fincancial services firms and resulting squeeze for meeting regulatory and economic capital norms. This cannot be achieved without both of the following:
1) I would absolutely hate to advocate scrapping of the mark-to-market rule, but a temporary 2-year moratorium on mark-to-market provisions related to assets in high-priority sectors would not be too bad. For the sake of argument, lets say we enforce a 2-year moratorium on mark-to-market provisions for new mortgage-related assets, including mortgage loans, MBS, CDOs and CMOs with residential and commercial real estate assets as collateral for the base reference credit. Considering the potential danger associated with rule-interpretation, derivatives (CDS) should be kept out of this moratorium and continue to be subject to mark-to-market norms.
2) There should be explicit provisions for emergency priority lending provisions targeted at residential/commercial mortgage and commercial lending. This can be either through carved out priority lending funds or clear provisions to channel a specified percentage of government funding to new loans in targeted sectors.
With steps like the above, banks can continue to build core-sector assets without undue downside risk, and also beef up interest income since base treasury funding rates would be low enough to provide decent margins even at low lending rates.

None of the above would ensure sutainability unless backed by strong regulatory changes as advocated in some of my earlier notes - oversight on credit rating agencies, enhancement of supervisory oversight on risk management, stronger corporate governance norms...among other things.