Shares of Huntington Bancshares Inc. (NASDAQ: HBAN) fell Friday afternoon after three days of gains as investors reacted negatively to news that the company planned to sell $400 million worth of common stock. At mid-afternoon Friday, shares of the Columbus, Ohio-based bank were down more than 2% to $4.41 a share.

On Friday, Huntington said it priced the shares at $4.20 a share, selling 95.2 million shares totaling some $400 million in gross proceeds. Deal underwriters have an 30-day option to buy another 14.3 million shares, the company said in a filing with the Securities and Exchange Commission.

In a shock to Wall Street, by a vote of 228 against and 205 for, the House just failed to approve the latest version of the $700 billion bailout bill. Why? Not enough Republicans backed it -- only 65 Republicans ended up voting for; they were running 2-to-1 against Democrats. Why not? Angry communications from their constituents saying they did not like it and a philosophical bent against bailouts. With the election weeks away, is this the Republicans last stand?

Who knows? But the outcome of the vote means that it's back to the drawing board for the bailout bill. Count me among those who believe that a better bill is possible -- that is, a bill that actually defines the problem(s) we face and offers a truly workable solution. I've posted about such a plan here.

Meanwhile, the Fed has injected $630 billion into global markets in the wake of the cratering of three financial institutions (FIs) in Europe. These include Belgian/Dutch insurer Fortis which received a $16 billion government capital injection; the nationalization of British mortgage lender Bradford & Bingley and $50 billion worth of guarantees for Hypo Real Estate Holding. And the Fed is adding $330 billion to its $290 billion currency swap program with global banks and $300 billion to its $150 billion Term Auction Facility (TAF) emergency loan program.

It seems that there is a problem with our financial system. That could be why Bear Stearns collapsed, the government took over Fannie Mae (NYSE: FNM), Freddie Mac (NYSE: FRE) and American International Group (NYSE: AIG). This problem could also explain why Merrill Lynch sold out to Bank of America (NYSE: BAC), why Lehman Brothers went bankrupt, and why JPMorgan Chase (NYSE: JPM) bought Washington Mutual (NYSE: WM). Problems with our financial system could also explain why the Commercial Paper market is freezing up -- making it harder for companies to come up with the short-term cash to pay employees and buy inventory.

But how did our system get to this point? There are five key principles of our current financial architecture that brought us here:

• Securitization. Up until about 30 years ago, people took out mortgages from an S&L and paid their loan officer every month until they owned their house. In the 1980s, Wall Street invented securitization -- the process of buying up, say, 1,000 mortgages from mortgage companies, creating a security based on those mortgages, paying for a AAA rating, and selling the securities to investors worldwide. Securitization is a problem for reasons I'll describe below.
• Too much borrowing. Over the last several years, Financial Institutions (FI) have made some $2 trillion in fees from securitization, according to DealBreaker. One reason for this is that they have been able to buy these securities -- of which there are $13 trillion on the market between Mortgage-Backed Securities (MBSs) and Collateralized Debt Obligations (CDOs) -- with a sliver of capital, roughly $340 billion. The typical FI had a ratio of assets to capital of 30:1. This meant that a mere 3% decline in the value of these securities would wipe out all the capital.