Henry Paulson would have us believe that the second plane has hit the towers and the buildings are about to collapse. With the strongest of scare tactics he tried to force through - unaltered - a plan that gave him unfettered control over $700B with no oversight. Congress tried to make the plan workable, adding some conditions (all of which had disturbing loop-holes), but the basic premise of the plan still stunk: that the approach to the financial crisis is to throw money at the most recent symptom and to do nothing about the cause.
All we can do is hope that the financial system as we know it will not completely implode while we ponder our options. On CNN last night the commentators were musing on the possibility of people's bank accounts being unaccessible and the economy crashing to a halt: I don't think that's likely, but I have no idea what turmoil we face in the near future.
I don't know what form the plan should take, but I am starting to develop a few ground rules:
1. Do not involve the Bush administration, including Treasury Secretary Paulson, in the planning. Their initial plan is so corrupt that they cannot be considered legitimate players. Their assurances (until a week or so ago) that there would be no crisis is why we didn't have a plan in place.
2. Look at the big picture. One of the problems with the the Paulson plan is that even if it works it does nothing to prevent waves of similar crises hitting the credit card industry and other sectors of the economy, but it weakens the ability of government to deal with subsequent crises. Plan for the entire crisis, not just this moment in time.
3. Try to address the cause of the financial crisis. Look at a moratorium on mortgage defaults, or guaranteed interest rates for mortgages, or government buying up mortgages, or something along those lines. Look at infrastucture projects that put money back into the middle class and build future potential. Address the issue of poverty (since, we are told, it is poor people who are defaulting the most). Again - look at the big picture.
4. Involve the financial industry. Tax-payers should not bear the entire burden. The financial industry got us into this mess and they should be part of the solution. Warren Buffet (who predicted this crisis and tried to get people to avert it) has already taken the lead. Ask Buffet and other industry leaders to work towards finding solutions. Let others in the industry know that if they don't get involved, there may be fines or prison time in their future.
5. Involve other countries. We all have a lot at stake here. Shoddy US regulations have caused losses and turmoil all over the world. Europe is just starting to take another big hit and Canada is expected to fall into the morass. This is a worldwide problem and requires a worldwide solution.
6. Regulate the goddamn financial sector!