Oh, how the mighty have fallen. Some of the most venerable names on Wall Street have, of late, become cautionary tales: Bear Stearns, Freddie Mac, Fannie Mae, Merrill Lynch, Lehman Brothers and AIG. I’ve spent my entire career in the financial world and I don’t think anyone would have predicted quite the extent to which these flagship names would find themselves hitting the rocks in 2008.

While the proposed government bailout of the financial system is still being solidified, I find my thoughts turning to the implications of these events for the building products industry. My first thought, upon digesting the recent news, is that the turmoil at these publicly traded entities may provide the largely non-public door and window industry with the type of capitulative event that I’ve discussed in the past. You’ll remember that capitulation is the point when a troubled market reaches a crescendo of negativity, after which recovery can begin. With most door and window companies being privately held, it was not possible for such an event to be marked by a massive sell-off of shares in companies in this industry. This external boiling point of negative activity, though, may be just what the housing and building products industries need.

The best news is that the Federal Reserve, the Treasury and other government watchdogs of the financial industry appear to have learned past lessons well. The removal of liquidity from the financial markets in a time of uncertainty is widely credited as being one of the primary causes of the Great Depression. Having looked down the barrel at situations like the Long Term Capital Management crisis in 1998, regulators have learned that a troubled market is one that badly needs liquidity to calm itself. Once again, the government has prudently stepped in at a time of crisis and averted what could have been an unprecedented tailspin in the financial markets. Only time and greater visibility as to the provisions of the bailout package will tell whether the events of recent weeks will come to be viewed as the turning point for the housing market and related industries. At the least, a financial crisis has been averted and an additional brick has been laid in the path to eventual recovery.