Various levels of playing "chicken" - financial crisis, driving in India, engaging in any economic trasnaction here

For those of you who aren't American, playing "chicken" (at least one variant of it) involves two cars driving at each other from a distance, and the chicken is the person who veers out of the way not to crash first. It is terrifying (I suppose, I am far too "chicken" to even consider watching it, let alone playing it), but it presumes that self-preservation will win out in the end and a crash will be avoided. Driving in India is a constant game of chicken, and it appears that engaging in many economic activities here is as well. But at the global level, we seem to be seeing this in financial markets around the world, centered around the game on Wall Street. There the question seems to be how the Chinese (specifically those entities managing their huge fx reserves) will react. Other Asian sovereign wealth funds are also relevant, but the overwhelming size of the Chinese funds makes the rest look small (even if we are talking about hundreds of billions of US$).

On the AIG nationalization, wow, who ever would have thought that would happen, even under the clueless Bush govt. I don't think that nationalization is so bad, benefiting from profits as well as losses, instead of the losing one sided proposition of recent reality where profits are private and losses are socialized, BUT I certainly hope that this is accompanied by a few things:
-- a serious look at the books to figure out what happened and who was responsible (maybe going after some of them to get back some money?,) -- something that needs to happen across the board;
-- a serious revamping of financial regulation. I think we need something like the UK's FSA, so that we don't have the OCC fighting with the Fed's regulators fighting with the state bank regulators fighting with state insurance regulators fighting with the SEC and on and on. However, we should learn from the FSA experience and clarify the Treasury-Fed-regulator relationship. But certainly someone in Washington needs to revamp insurance regulation, which is a mismash of state regulation as part of this.
-- more transparency on capital market transactions all around, on compensation, and some sort of deferred compensation that is tied to the life of an instrument, not just to its creation and sale.
-- a rethink (really hard) of how not only to regulate, but also capture the financial state in terms of accounting when markets are moving so fast. Mark to market makes sense sometimes, but how do we reconcile this with such volatility?

I need to think more and harder about this, but want to get this up before it is all too old news.