Even if you don’t own a stock or bond, the financial calamities of the past few days are bad news. Bank of America acquired Merrill Lynch in a fire sale, Lehman Brothers landed in bankruptcy court, and the world’s largest insurance company, AIG, is urgently seeking cash.

These developments will make it tougher for Americans to get loans and for credit-strapped businesses to maintain current payrolls and invest. The cumulative effect could smother an economy already choking from nearly 14 months of real estate misery. And Monday, things worsened as stocks endured the biggest one-day trading decline since Sept. 11, 2001.

No one can predict how many more mortgage-related financial surprises are ahead, and that has a chilling effect on consumer and investor confidence. The uncertainty also handcuffs government policymakers, such as the Federal Reserve.

The Fed is precariously balancing the need to hike interest rates to combat inflation with the competing possibility that it might have to slash those rates to revive the economy. Higher interest rates would hit borrowers when they could ill afford it. Lower rates could unleash a vicious spiral of inflation.

The weekend’s events underscore the need for a better balance of financial risks and regulation in a free-market economy. We urge presidential candidates John McCain and Barack Obama to do more than jawbone this issue, given that one of them is going to inherit a very unstable economy.

Monday, Obama continued to lay blame on the obvious – that “too many folks in Washington and on Wall Street weren’t minding the store.” McCain is scant better, promising reform while blaming a climate of greed and coziness among mega-lenders.

The nation needs far more from both men – specifically, commitments to more aggressive oversight and transparency of complicated financial transactions that pose substantial risks to the entire economy. Both have some claim to the financial reform mantle – Obama is relatively new to Washington, and McCain seems to have learned his lesson and kept his distance from dangerous relationships since the Keating Five experience in the 1980s.

If there is a silver lining, it is that the government let both troubled investment companies fend for themselves, in contrast to its approach to the Bear Stearns collapse. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke locked Wall Street’s captains in a room and made it clear that there would be no government bailout this time. Appropriately, this restores some measure of accountability to Wall Street.

Wall Street has a history of testing the limits of financial common sense, a trait that has made – and lost – fortunes. Regulators, Congress and the next president must commit to fixing a badly broken system.