Safety Nets for the Rich

By BOB HERBERT, NY Times, October 20, 2009

The headlines that ran side by side on the front page of Saturday’s New York Times summed up, inadvertently, the terrible fix that we’ve allowed our country to fall into.

The lead headline, in the upper right-hand corner, said: “U.S. Deficit Rises to $1.4 Trillion; Biggest Since ’45.”

The headline next to it said: “Bailout Helps Revive Banks, And Bonuses.”

We’ve spent the last few decades shoveling money at the rich like there was no tomorrow. We abandoned the poor, put an economic stranglehold on the middle class and all but bankrupted the federal government — while giving the banks and megacorporations and the rest of the swells at the top of the economic pyramid just about everything they’ve wanted.

And we still don’t seem to have learned the proper lessons. We’ve allowed so many people to fall into the terrible abyss of unemployment that no one — not the Obama administration, not the labor unions and most certainly no one in the Republican Party — has a clue about how to put them back to work.

Meanwhile, Wall Street is living it up. I’m amazed at how passive the population has remained in the face of this sustained outrage.

Even as tens of millions of working Americans are struggling to hang onto their jobs and keep a roof over their families’ heads, the wise guys of Wall Street are licking their fat-cat chops over yet another round of obscene multibillion-dollar bonuses — this time thanks to the bailout billions that were sent their way by Uncle Sam, with very little in the way of strings attached.

Nevermind that the economy remains deeply troubled. As The Times pointed out on Saturday, much of Wall Street “is minting money.”

Call it déjà voodoo. I wrote a column that ran three days before Christmas in 2007 that focused on the deeply disturbing disconnect between Wall Streeters harvesting a record crop of bonuses — billions on top of billions — while working families were having a very hard time making ends meet.

We would later learn that December 2007 was the very month that the Great Recession began. I wrote in that column: “Even as the Wall Streeters are high-fiving and ordering up record shipments of Champagne and caviar, the American dream is on life support.”

So we had an orgy of bonuses just as the recession was taking hold and now another orgy (with taxpayers as the enablers) that is nothing short of an arrogantly pointed finger in the eye of everyone who suffered, and continues to suffer, in this downturn.

Whether P.T. Barnum actually said it or not, there is a sucker born every minute. American taxpayers might want to take a look in the mirror. If the epithet fits...

We need to make some fundamental changes in the way we do things in this country. The gamblers and con artists of the financial sector, the very same clowns who did so much to bring the economy down in the first place, are howling self-righteously over the prospect of regulations aimed at curbing the worst aspects of their excessively risky behavior and preventing them from causing yet another economic meltdown.

We should be going even further. We’ve institutionalized the idea that there are firms that are too big to fail and, therefore, “we, the people” are obliged to see that they don’t — even if that means bankrupting the national treasury and undermining the living standards of ordinary people. What sense does that make?

If some company is too big to fail, then it’s too big to exist. Break it up.

Why should the general public have to constantly worry that a misstep by the high-wire artists at Goldman Sachs (to take the most obvious example) would put the entire economy in peril? These financial acrobats get the extraordinary benefits of their outlandish risk-taking — multimillion-dollar paychecks, homes the size of castles — but the public has to be there to absorb the worst of the pain when they take a terrible fall.

Enough! Goldman Sachs is thriving while the combined rates of unemployment and underemployment are creeping toward a mind-boggling 20 percent. Two-thirds of all the income gains from the years 2002 to 2007 — two-thirds! — went to the top 1 percent of Americans.

We cannot continue transferring the nation’s wealth to those at the apex of the economic pyramid — which is what we have been doing for the past three decades or so — while hoping that someday, maybe, the benefits of that transfer will trickle down in the form of steady employment and improved living standards for the many millions of families struggling to make it from day to day.

That money is never going to trickle down. It’s a fairy tale. We’re crazy to continue believing it.

Report on Bailouts Says Treasury Misled Public

BUSH'S GIFT THAT KEEPS ON GIVING;

Thank You George, and The Support of The Then-Dominant Republican Party

By LOUISE STORY

WASHINGTON — The inspector general who oversees the government’s bailout of the banking system is criticizing the Treasury Department for some misleading public statements last fall and raising the possibility that it had unfairly disbursed money to the biggest banks.

A Treasury official made incorrect statements about the health of the nation’s biggest banks even as the government was doling out billions of dollars in aid, according to a report on the Troubled Asset Relief Program to be released on Monday by the special inspector general, Neil M. Barofksy.

The report also provides new insight into the way the Treasury allocated billions of dollars to nine of Wall Street’s largest players. The report says that Bank of America appeared to qualify for more aid earlier, under the government plan. That assertion adds another element of intrigue to continuing investigations of the bank’s merger with Merrill Lynch and the role that regulators played in the deal, even as Merrill’s condition deteriorated.

The bailout formula called for banks to get an amount equal to as much as 3 percent of their risk-weighted assets, with aid capped at $25 billion for each institution, according to the report. By size, Citigroup, JPMorgan Chase and Bank of America could have qualified for more, and the first two received $25 billion.

But Bank of America was given only $15 billion in October, since Merrill Lynch was earmarked for $10 billion. The two companies agreed to a merger, though their deal had not yet been approved by regulators or shareholders.

Bank of America ultimately received Merrill’s $10 billion in January — as well as $20 billion in additional bailout funds — but if the bank had not been involved in the Merrill deal, it would probably have received $25 billion at the outset, as did Citigroup and JPMorgan.

Another company in the process of a merger was not treated the same. Wells Fargo was acquiring Wachovia, and it received both companies’ money at the start, according to the inspector general.

Mr. Barofsky’s office also says that regulators were wrong to tell the public last year that the earliest bailout recipients were all healthy.

Former Treasury Secretary Henry M. Paulson Jr., for instance, said on Oct. 14 that the banks were “healthy,” and that they accepted the money for “the good of the U.S. economy.” The banks, he said, would be better able to increase their lending to consumers and businesses.

In truth, regulators were concerned about the health of several banks that received that first bailout, the inspector general writes.

The inspector general said government officials need to be more careful when describing their actions and rationale. In a letter included with the report, the Federal Reserve concurred with Mr. Barofsky’s concern about the statements made last year, but the Treasury Department said that any review of announcements last year “must be considered in light of the unprecedented circumstances in which they were made.”

Chutzpah on Steroids

By BOB HERBERT, NY Times

Washington

What is up with the banks and the rest of the financial industry? The people running this system remind me of gangsters who manage to walk out of the courthouse with a suspended sentence and can’t wait to get back to their nefarious activities.

These malefactors of great wealth (thank you, Teddy) developed hideously destructive credit policies and took insane risks that hurt millions of American families and nearly wrecked the economy. Then they were bailed out with hundreds of billions of taxpayer dollars, money that came from the very people victimized by the industry’s outlandish practices.

Now the industry is fighting against creation of an agency that would protect taxpayers and ordinary consumers from a similarly devastating onslaught in the future. And at the same time they are scrambling to raise credit card interest rates and all manner of exploitive fees to build a brand new superstructure of questionable profits on the backs of the taxpayers who came to their rescue.

We’re reaching a whole new level of chutzpah here.

The Obama administration wants to create a Consumer Financial Protection Agency that would shield individuals and families from deceptive practices and outright fraud by banks and other businesses offering credit cards, mortgages, home loans and other forms of consumer finance.

Everything we’ve learned in this recession tells us we need such an agency. As Treasury Secretary Timothy Geithner described it, “This agency will have only one mission: to protect consumers.”

Protecting the consumer is, of course, anathema to the industry. So it’s preparing for war. The Times’s Edmund Andrews neatly summed up the matter when he wrote that “banks and mortgage lenders are placing top priority on killing” the president’s proposal.

The proposed agency developed from an idea offered some time ago by Elizabeth Warren, a Harvard Law School professor who currently chairs the Congressional Oversight Panel, which has been monitoring the financial industry bailouts. She is a strong contender to lead the proposed new agency.

Ms. Warren told a Congressional committee last month about the stark difference between the warm and fuzzy advertising approach used by lenders competing for consumer dollars and the treachery that is so often hidden in the fine print.

“Giant lenders compete for business by talking about nominal interest rates, free gifts and warm feelings,” she said, “but the fine print hides the things that really rake in the cash. Today’s business model is about making money through tricks and traps.”

It should be clear by now that it is often the goal of financial institutions to see that the consumer is not well informed. “In the early-1980s,” said Professor Warren, the average credit card contract was about a page long. “Today, it is more than 30 pages. ... I am a contract law professor, and I cannot make out some of the fine print.”

She added, “Study after study shows that credit products are designed in ways that obscure the meaning and trick customers.”

There is nothing free or fair about a market in which one side uses double talk and mumbo jumbo to obscure important information and deliberately dupe the other side into making decisions against its own interests.

When I think of the banking industry fighting to kill this proposed agency, it brings to mind the decades in which tobacco companies insisted that cigarettes were safe, and those days long ago when the auto companies fought against seat belts, and all the dopey arguments that were made against protecting the public from unsafe drugs and kitchen appliances that might burst into flames, and so on.

The Department of Housing and Urban Development has concluded that Americans spend approximately $55 billion each year on closing costs that they don’t fully understand. As Ms. Warren noted, “Mortgage lenders furnish reams of unreadable documents shortly before closing, often leaving people with no practical option but to take whatever terms the lender has filled in.”

The family home is the largest purchase most Americans ever make. Paying it off can take much of a lifetime. Everything about that contract should be crystal clear to the buyer.

I had a breakfast interview with Ms. Warren on a variety of subjects last week. On the day of the meeting, USA Today had a front-page article that began: “Even as regulators crack down on abusive mortgage and credit card practices, another type of lending threatens to mire consumers in a credit trap.”

The article detailed the ways in which banks are wringing huge profits from overdraft fees that often are sky high and in many cases are handled in ways that are exploitive, if not predatory.

The malefactors of great wealth view an informed consumer as Public Enemy No. 1. The last thing in the world that they want is a fair marketplace, which is why the Consumer Financial Protection Agency can’t come fast enough.

Promised Help Is Elusive for Some Homeowners

By PETER S. GOODMAN

MESA, Ariz. — She had seen the advertisements for the new government program offering relief. She had heard President Obama promise that help was on the way for homeowners like her, people who had lost jobs and could no longer make their mortgage payments.

But when Eileen Ulery called her mortgage company — Countrywide, now part of Bank of America — the bank did not offer to alter her mortgage. Rather, the bank tried to sell her a new loan with a slightly lower monthly payment while asking her to pay $13,000 toward the principal and a fresh $5,000 in fees.

Her problem was that she did not yet present a big enough problem to merit aid.

Yes, she was teetering toward delinquency. She was among millions of homeowners rapidly sliding toward danger for whom the Obama administration had devised an aid program — some already in foreclosure proceedings, others headed that way as they ran out of means to make their payments. But unlike those in imminent peril of losing their homes, Ms. Ulery had never missed a payment.

“I don’t know who this bailout is helping,” she said. “We’ve given these banks all this money and they’re not doing what they say they’re doing. Something’s not working right. They keep saying they’re doing all this, but we don’t see it down here at this level.”

More than three months after the Obama administration outlined a new program aimed at rescuing millions of distressed homeowners by compensating banks that modify mortgages, Ms. Ulery’s experience illustrates the mixture of confusion, frustration and limited assistance that now reigns.

Through many months of wrangling over the fate of the financial system, with hundreds of billions of taxpayer dollars dispensed on bailouts, distressed homeowners have waited for their own rescue amid talk that it was finally on the way. Modifications of so-called subprime and Alt-A mortgages — those made to people with tarnished credit — actually fell by 11 percent in May from April, according to research by Alan M. White at Valparaiso University School of Law.

A Treasury spokeswoman, Jenni Engebretsen, confirmed that homeowners like Ms. Ulery — current on their mortgages yet grappling with a hardship like unemployment — were eligible for loan modifications under the program. She said mortgage servicers had offered to modify more than 100,000 loans since the department announced the program.

But how many loans have been modified? Ms. Engebretsen declined to say, noting that the Treasury was working with mortgage companies to “fine-tune reporting systems.”

A spokesman for Bank of America Home Loans, Rick Simon, confirmed that the bank offered Ms. Ulery refinancing and not loan modification. The bank is now focusing on modifications only for those borrowers “who are already in severe threat of foreclosure,” he said.

“We’re still putting the systems in place to handle people who are current on their loans,” Mr. Simon said, declining to say how many loans Bank of America had modified. “It’s still very, very early in the program.”

Ms. Ulery, 63, is the face of the latest wave of troubled American homeowners, a surge of people in financial danger not because of reckless gambling on real estate, but because of lost income.

Far from being one of those who used easy-money loans to speculate on homes proliferating across the desert soil of greater Phoenix, she has lived in the same modest, stucco-sided condo in suburban Mesa for a dozen years. She bought the two-bedroom home in 1997 for $77,500.

For two decades, she worked as an executive assistant at nearby Arizona State University, bringing home more than $1,000 every other week — enough to pay the bills.

Round-faced, wry and given to staccato bursts of laughter, Ms. Ulery regularly visits yard sales, seeking out plates and patchwork quilts for her collections. She takes pleasure in her two grandchildren and her beagle. She enjoys an occasional glass of wine, favoring a $6 merlot that comes in a screw-top bottle.

“I’m not an extravagant-type person,” she said. “I see these big houses all around, and they’re beautiful, but I’m comfortable in my little condo.”

Like tens of millions of other American homeowners, she added to her mortgage balance as the value of her condo swelled, at one point exceeding $200,000. She refinanced to pay off some credit cards and settle into a 30-year, fixed-rate loan. Later, she took out a home equity line of credit to buy a new Hyundai. She refinanced again in 2007, borrowing $20,000, mostly for a new roof.

Over the years, her monthly payment swelled from about $600 to more than $1,000. With planning and self-control — she tracks her monthly expenses on a color-coded spreadsheet — she always came up with the money. “I’ve never been late,” she said.

But the equation broke down last year, when she lost her job in university budget cuts. Ms. Ulery received six months of severance. She arranged a monthly $1,500 Social Security check. But when the severance ran out in October, her mortgage finally exceeded her limited means.

With so many people out of work, and with her doctor counseling rest for a stress-related illness, she did not pursue another paycheck, negotiating to have her university pension begin earlier. She has been leaning on credit cards.

Across the country, millions of homeowners in similar straits have been sliding into delinquency. Some owe more than their houses are worth.

Ms. Ulery is among that unhappy cohort — her house is worth about $122,000, and she owes $143,000 — but walking away is not for her.

“In my family, we don’t do that,” she said. “You pay your bills. And I wanted my home.”

In March, she heard about the Obama administration program. The Countrywide Web site directed her to a government site, makinghomeaffordable.gov, she said. There, she took a test to determine her eligibility for a loan modification.

Was her home her primary residence? Check. Was she having trouble paying her mortgage? Check again, and so on until the screen told her that she might qualify.

In April, she called the bank. The representative said the bank was not doing modifications for people like her, she recalled. He shifted the conversation: if she handed over $18,000, he could lower her payment to $967 from $1,046. Her interest rate would actually increase slightly, with the drop largely because she was putting down more money.

“I just laughed,” Ms. Ulery said. “It was a really good deal for them.”

To which she poses her own question: What sort of deal is it for the American taxpayer? As she sees it, the same banks that generated the mortgage crisis are now getting public money to fix it, while doing little more than seeking new fees.

“I don’t think the government gets it,” she said. “These are the same people you couldn’t trust before.”

Stop Being Stupid

By BOB HERBERT

I’ve got a new year’s resolution and a new slogan for the country.

The resolution may be difficult, but it’s essential. Americans must resolve to be smarter going forward than we have been for the past several years.

Look around you. We have behaved in ways that were incredibly, astonishingly and embarrassingly stupid for much too long. We’ve wrecked the economy and mortgaged the future of generations yet unborn. We don’t even know if we’ll have an automobile industry in the coming years. It’s time to stop the self-destruction.

The slogan? “Invest in the U.S.” By that I mean we should stop squandering the nation’s wealth on unnecessary warfare overseas and mindless consumption here at home and start making sensible investments in the well-being of the American people and the long-term health of the economy.

The mind-boggling stupidity that we’ve indulged in was hammered home by a comment almost casually delivered by, of all people, Bernie Madoff, the mild-mannered creator of what appears to have been a nuclear-powered Ponzi scheme. Madoff summed up his activities with devastating simplicity. He is said to have told the F.B.I. that he “paid investors with money that wasn’t there.”

Somehow, over the past few decades, that has become the American way: to pay for things — from wars to Wall Street bonuses to flat-screen TVs to video games — with money that wasn’t there.

Something for nothing became the order of the day. You want to invade Iraq? Convince yourself that oil revenues out of Baghdad will pay for it. (Meanwhile, carve out another deficit channel in the federal budget.) You want to pump up profits in the financial sector? End the oversight and let the lunatics in the asylum run wild.

For those who wanted a bigger house in a nicer neighborhood, there were mortgages with absurdly easy terms. Credit-card offers came in the mail like confetti, and we used them like there was no tomorrow. For students stunned by the skyrocketing cost of tuition, there were college loans that could last a lifetime.

Money that wasn’t there.

Plenty of people managed their credit wisely. But much of the country, including many of the top government officials and financial titans who were supposed to be guarding the nation’s wealth, acted as if there would never be a day of reckoning, a day when — inevitably — the soaring markets would crash and the bubbles explode.

We were stupid in so many ways. We shipped American jobs overseas by the millions and came up with the fiction that this was a good deal for just about everybody. We could have and should have taken the time and made the effort to think globalization through, to be smarter about it and craft ways to cushion its more harmful effects and to share its benefits more equitably.

We bought into the dopey idea that you could radically cut taxes and still maintain critical government services — and fight two wars to boot!

We were living in a dream world. The general public, and to a great extent the press, closed its eyes to the increasingly complex and baffling machinations of the financial industry, which kept screaming that oversight would ruin everything.

We should have known better. It didn’t require a genius (or even an economics degree) to understand a crucial point that popped up some years ago in a front-page article in The Wall Street Journal: “Markets are a great way to organize economic activity, but they need adult supervision.”

Did Alan Greenspan not understand that? Bob Rubin? Larry Summers?

Now that the reality of a stunning economic downturn has so roughly intervened, we at least have the option of being smarter going forward. There is broad agreement that we have no choice but to go much more deeply into debt to jump-start the economy. But we have tremendous choices as to how we use that debt.

We should use it to invest in the U.S. — in a world-class infrastructure (in its broadest sense) to serve as the platform for a world-class, 21st-century economy, and in a system of education that actually prepares American youngsters to deal successfully with the real world they will be encountering.

We need to invest in a health care system that improves the quality of American lives, enhances productivity, puts large numbers of additional people to work and eases the competitive burden of U.S. corporations.

We need to care for our environment (if long-term survival means anything to us) and get serious about weaning ourselves from foreign oil.

And, finally, we need to start living within our means and get past the nauseating idea that the essence of our culture and the be-all and end-all of the American economy is the limitless consumption of trashy consumer goods.

It’s time to stop being stupid.

It's OK, Morning Joe

I've been having a bit of fun with "Morning Joe" Scarborough on his use of a four letter word on air. Today it's time to let him off the hook. Yep, many of us have let slip with something we wish we wouldn't have. Certainly not all of us. But many.

Joe had a slip of the tongue and I called him out on it, as did many other bloggers and columnists. Why? Because Joe had been so unrelentingly tough on others who had a slip of the tongue.

When commercial television is happy to run ads on erectile dysfunction during a family show that I'm watching with my child, then I'm not sure when and how the FCC can step in anywhere, really. I find it interesting that there is "parental controls" for televsion shows, but not for commercials, many of which are more offensive than some of the offending television shows.

But Morning Joe for the longest time found no quarter with any slips, such as those from Bono or Cher... something a bit different than planned out profanities or sex scenes. In fact, I blame my generation who started MTV and came of age as Executives of Television networks. Fox is the worst of the bunch, having expanded mores from its inception... followed by the astounding establishment of its antithesis, Fox News... which never comments on the loose morals of the Fox Network.

So, Morning Joe. you don't have to say it ain't so. I'm giving you a freebie. You meant it. You just didn't know you were on air. And I'm forgiving of missteps. Perhaps you'll do the same.

Addendum:

I watched this morning's Morning Joe... no, not for a potential slip of the tongue... although Mourning Mika provides many herself, albeit non-profanity laced.

I was happy to hear Joe's very pragmatic, non-ideological take on the bailout of the car companies. I quite agreed with him. Certainly, no bailout should happen with the same people remaining at the top, since they've gotten us into this mess. However, as Joe stated, American workers are great and should not have to suffer for the misdeeds of their inept CEO's.

His second take of making the bailout contingent on 1) replacing inept management; and 2) requirement of a Manhattan Project-type program of hunkering down to design cars that are visually desireable, and more importantly, green - whether it be better gas mileage or entirely new modes of propulsion.

Kudos, Morning Joe

Beyond Election Day

By BOB HERBERT

Conservative commentators had a lot of fun mocking Barack Obama’s use of the phrase, “the fierce urgency of now.”

Noting that it had originated with the Rev. Dr. Martin Luther King Jr., Senator Obama made it a cornerstone of his early campaign speeches.

Conservatives kicked the phrase around like a soccer ball. “The fierce urgency of now,” they would say, giggling. What does it mean?

Well, if your house is on fire and your family is still inside, that’s an example of the fierce urgency of now.

Something like that is the case in the United States right now as Americans go to the polls in what is probably the most important presidential election since World War II. A mind-boggling series of crises is threatening not just the short-term future but the very viability of the nation.

The economy is sinking into quicksand. The financial sector, guardian of the nation’s wealth, is leaning on the crutch of a trillion-dollar taxpayer bailout. The giant auto companies — for decades the high-powered, gas-guzzling, exhaust-spewing pride of American industry — are on life support.

As the holiday shopping season approaches, the nation is hemorrhaging jobs, the value of the family home has plunged, retirement plans are shrinking like ice cubes on a hot stove and economists are telling us the recession has only just begun.

It’s in that atmosphere that voters today will be choosing between the crisis-management skills of Senator Obama, who has enlisted Joe Biden as aide-de-camp, and those of Senator John McCain, who is riding to the rescue with Sarah Palin and Joe the Plumber in tow.

As important as this choice has become, the election is just a small first step. What Americans really have to decide is what kind of country they want.

Right now the United States is a country in which wealth is funneled, absurdly, from the bottom to the top. The richest 1 percent of Americans now holds close to 40 percent of all the wealth in the nation and maintains an iron grip on the levers of government power.

This is not only unfair, but self-defeating. The U.S. cannot thrive with its fabulous wealth concentrated at the top and the middle class on its knees. (No one even bothers to talk about the poor anymore.) How to correct this imbalance is one of the biggest questions facing the country.

The U.S. is also a country in which blissful ignorance is celebrated, and intellectual excellence (the key to 21st century advancement) is not just given short shrift, but is ridiculed. Paris Hilton and Britney Spears are cultural icons. The average American watches television a mind-numbing 4 1/2 hours a day.

At the same time, our public school system is plagued with some of the highest dropout rates in the industrialized world. Math and science? Forget about it. Too tough for these TV watchers, or too boring, or whatever.

“When I compare our high schools with what I see when I’m traveling abroad,” said Bill Gates, “I am terrified for our work force of tomorrow.”

The point here is that as we approach the end of the first decade of the 21st century, the United States is in deep, deep trouble. Yet instead of looking for creative, 21st-century solutions to these enormous problems, too many of our so-called leaders are behaving like clowns, or worse — spouting garbage in the public sphere that hearkens back to the 1940s and ’50s.

Thoughtful, well-educated men and women are denounced as elites, and thus the enemies of ordinary Americans. Attempts to restore a semblance of fiscal sanity to a government that has been looted with an efficiency that would have been envied by the mob, are derided as subversive — the work of socialists, Marxists, Communists.

In 2008!

In North Carolina, Senator Elizabeth Dole, a conservative Republican, is in a tough fight for re-election against a Democratic state senator, Kay Hagan. So Ms. Dole ran a television ad that showed a close-up of Ms. Hagan’s face while the voice of a different woman asserts, “There is no God!”

Americans have to decide if they want a country that tolerates this kind of debased, backward behavior. Or if they want a country that aspires to true greatness — a country that stands for more than the mere rhetoric of equality, freedom, opportunity and justice.

That decision will require more than casting a vote in one presidential election. It will require a great deal of reflective thought and hard work by a committed citizenry. The great promise of America hinges on a government that works, openly and honestly, for the broad interests of the American people, as opposed to the narrow benefit of the favored, wealthy few.

By all means, vote today. But that is just the first step toward meaningful change.

Where Are the Grown-Ups?

By PAUL KRUGMAN
Many people on both the right and the left are outraged at the idea of using taxpayer money to bail out America’s financial system. They’re right to be outraged, but doing nothing isn’t a serious option. Right now, players throughout the system are refusing to lend and hoarding cash — and this collapse of credit reminds many economists of the run on the banks that brought on the Great Depression.

It’s true that we don’t know for sure that the parallel is a fair one. Maybe we can let Wall Street implode and Main Street would escape largely unscathed. But that’s not a chance we want to take.

So the grown-up thing is to do something to rescue the financial system. The big question is, are there any grown-ups around — and will they be able to take charge?

Earlier this week, Henry Paulson, the Treasury secretary, tried to convince Congress that he was the grown-up in the room, come to protect us from danger. And he demanded total authority over the rescue: $700 billion to be used at his discretion, with immunity for future review.

Congress balked. No government official should be entrusted with that kind of monarchical privilege, least of all an official belonging to the administration that misled America into war. Furthermore, Mr. Paulson’s track record is anything but reassuring: he was way behind the curve in appreciating the depth of the nation’s financial woes, and it’s partly his fault that we’ve reached the current moment of meltdown.

Besides, Mr. Paulson never offered a convincing explanation of how his plan was supposed to work — and the judgment of many economists was, in fact, that it wouldn’t work unless it amounted to a huge welfare program for the financial industry.

But if Mr. Paulson isn’t the grown-up we need, are Congressional leaders ready and able to fill the role?

Well, the bipartisan “agreement on principles” released on Thursday looks a lot better than the original Paulson plan. In fact, it puts Mr. Paulson himself under much-needed adult supervision, calling for an oversight board “with cease and desist authority.” It also limits Mr. Paulson’s allowance: he only (only!) gets to use $250 billion right away.

Meanwhile, the agreement calls for limits on executive pay at firms that get federal money. Most important, it “requires that any transaction include equity sharing.”

Why is that so important? The fundamental problem with our financial system is that the fallout from the housing bust has left financial institutions with too little capital. When he finally deigned to offer an explanation of his plan, Mr. Paulson argued that he could solve this problem through “price discovery” — that once taxpayer funds had created a market for mortgage-related toxic waste, everyone would realize that the toxic waste is actually worth much more than it currently sells for, solving the capital problem. Never say never, I guess — but you don’t want to bet $700 billion on wishful thinking.

The odds are, instead, that the U.S. government will end up having to do what governments always do in financial crises: use taxpayers’ money to pump capital into the financial system. Under the original Paulson plan, the Treasury would probably have done this by buying toxic waste for much more than it was worth — and gotten nothing in return. What taxpayers should get is what people who provide capital are entitled to: a share in ownership. And that’s what the equity sharing is about.

The Congressional plan, then, looks a lot better — a lot more adult — than the Paulson plan did. That said, it’s very short on detail, and the details are crucial. What prices will taxpayers pay to take over some of that toxic waste? How much equity will they get in return? Those numbers will make all the difference.

And in any case, it seems that we don’t have a deal.

This has to be a bipartisan plan, and not just at the leadership level. Democrats won’t pass the plan without votes from rank-and-file Republicans — and as of Thursday night, those rank-and-file Republicans were balking.

Furthermore, one non-rank-and-file Republican, Senator John McCain, is apparently playing spoiler. Earlier this week, while refusing to say whether he supported the Paulson plan, he claimed not to have had a chance to read it; the plan is all of three pages long. Then he inserted himself into the delicate negotiations over the Congressional plan, insisting on a White House meeting at which he reportedly said little — but during which consensus collapsed.

The bottom line, then, is that there do seem to be some adults in Congress, ready to do something to help us get through this crisis. But the adults are not yet in charge.

Video Dog: Henry Paulson on How He'll Protect the Taxpayers