If McCain doesn't show for tomorrow's debate, Obama should hold a town hall with a broad range of economists known for their expertise in financial markets and financial crises. He should then moderate a forum on the choices we Americans face in this crisis: the seriousness of the problem; The need for action; The different approaches (direct intervention, building confidence, etc.); and some points that all can agree on and that can serve as the foundation for a grand compromise.

If Obama is really serious about providing leadership, he can invite to participate one or two economic historians with good perspective on how financial crises have been handled in the past, both recent and more distant.

It would be an effort to pull it off short-notice, but if he does, it would be a campaign moment and one that is focused on issues, not posturing.

Create a blue ribbon comission? Translation: lets spend a lot of time and little money and not do anything.

And then there is the idea that this can be solved on the mortgage insurance model. "Mortgage insurance" on problematic assets, which mostly are mortgage-backed securities, are already out there. They are called Credit Default Swaps. Those who write this insurance, like A.I.G., go under, or have to be bailed out. It's the CDS that are the scariest of the toxic waste on the balance sheets.

I hate to say it, but in some ways this reminds me of the fall of the Soviet Union. Neoclassical economics has been the orthodoxy of this country since Reagan, and it obviously can't work in pure form, but it's adherents refuse to admit this.

The GOP is now in full-scale civil war between pragmatists and true-believers, and they'll probably do great harm to this country before they settle their scores. Unfortunately, this is not just an inside Washington problem, there are a lot of true believers out there who are blind to the limits of their ideology and the damage it is causing. I'm afraid this will be a much diminished nation before this is through.

This country is dependent on foreign capital to function. I think Thursday's event will cause many overseas to conclude that this nation can no longer govern itself in way that makes it an attractive place to invest. Look for the dollar to tank.

Right now, the House Republicans and John McCain are being read the riot act by the true owners of power in America: Wall Street. Since the scope of an individual congressman in Podunk USA is small, I think many in the House will remain obstinate, but tonight McCain will be reminded that the president of the United States bases his power in large part on the health of American finance and that the president of the United States is therefore beholden to the interests of American finance. He will then crumble into a little ball and meekly ask forgiveness.

This whole episode has made our entire government, from Bush to McCain to Obama to Pelosi, look pathetic. Our better days are behind us.

So what's your guys' position on this? Do you want Obama and the Dems to support whatever bailout plan gets placed before the Congress or do you want him or they to oppose it?

"Republican politicians have spent several decades convincing themselves that any economic problem on earth can be solved by cutting taxes and deregulation."

When all you have is a hammer, everything looks like a nail.

Answer to Chicounsel: I want Obama and the Democrats to do the right thing. This isn't about blind support or opposition for a hastily thrown together plan. It's about protecting the average American so that we won't spend the next century paying for reckless free market worshipers in addition to war profiteers. (Too late...)

Chicounsel--

It's clear to me what needs to be done, the same that the did in Sweden and Japan when they faced similar problems in the 1990s. They recapitalized the financial institutions using taxpayer money in exchange for shares. The govt later sells the shares for a profit when the institutions recover. It's temporary nationalization. It works, but the hardcore GOP won't accept it because it's against their ideology.

Therefore, I think the Dems should accept a plan that includes the govt taking an equity stake in the institutions. That's close enough to what I described above. The taxpayers get something for their money and probably a profit.

In fact, I think this is the only way out of this mess. At this point it's not about politics, it's about averting disaster.

For anyone interested, I decided to use McCain's brilliant strategy to help solve the energy crisis. So far, it's worked just as well.
The Dog Ate My Brain

There is a little more to why they are scrambling.

Sept. 30 is the deadline for compliance with Basel 2.

The whole ponzie scheme of mortgage backed direvetives is going to collapse.

There ain’t no money.

http://www.developer.com/java/.....hp/3403901

At this point it's not about politics, it's about averting disaster.

Its past that, too, its now about mitigating disaster.

The Republicans do the same thing over and over, expecting a different outcome. It is the very definition of insanity.

Did they really say 'blue ribbon'?

"Republican politicians have spent several decades convincing themselves that any economic problem on earth can be solved by cutting taxes and deregulation."

Oh it's not limited to just economic problems. Tax cuts make the sun shine, they cure cancer, they keep the neighbor's cat out of your yard, they regrow your balding head, they buy your daughter a magical unicorn, they give you an erection and win you the election. Tax cuts can do anything!

Deregulation got out that nasty grease stain from my favorite slacks and brought my nanna back from the dead. And it's great on popcorn, too!

New & Improved Deregulation: Now with caveats!

I say that, of course, with the utmost respect for Tom Waits. I only steal from him because I love him.

Thanks, Doctor Biobrain, I can't remember the last time I laughed that hard.

Hilzoy, you need a link to Steve's earlier expose of the source of the "blue ribbon panel" idea. I love how the Republicans don't even know they're supposed to rename it to cover their tracks.

John McCain could sell 5 houses for a start...do you think voters who are seeing their life savings getting absorbed/shifted/ bounced around are going to feel all right knowing their candidate has multiple unused "investment" properties ? Now we're seeing gas lines in the South, multiple storms swelling in the carribbean ad a global warming denier as his running mate? Why does McCain hate America?

There likely already is mortgage insurance on the "bad loans." However, that private insurance - other than Freddie/Fannie - is not paying off because the loans likely violated underwriting standards that had to be met for the insurance to be valid. For the government to "insure" the loans creates as big a moral hazard as the government "buying" the loans. At least when the government "buys" the loans, the taxpayers have something. If business buys "mortgage insurance", then taxpayers have the premiums, and later a big headache if the mortgage defaults. Regardless, the problem is not the bad loans - it's all of the other financial instruments that multiplied the bad loans through the economy.

Brilliant plan repubs.

Just a couple questions.

Where is this fucking private capital that you speak of?

Isn't that the problem?

No private capital so that the government needs to inject $700 BILLION into the system.

It's too bad the Repubs understand finance like they understand war which is to say not at all.

Insurance won't work for the same reason that no one is writing flood insurance in Galveston right now to cover damage by last week's hurricane.

Republican politicians have spent several decades convincing themselves that any economic problem on earth can be solved by cutting taxes and deregulation. We now face a problem which is caused by deregulation and to which taxes are largely irrelevant. Do they rethink their views -- the views that got us into this mess to start with? Do they wonder whether the same old exhausted ideas can possibly be stretched to fit our current crisis?

To the man with a hammer, every problem looks like a nail.

Did somebody say "Pabst Blue Ribbon?"
shucks!

the proper rebuttal to a neocon(safe for children):
"Your lips ARE moving, but what's coming out is poopy-looking."

How about if the top .5% in income taxpayers are assessed a 'Patriotic Duty' surcharge on their income? Then that money could be used to 'invest' in the shaky securities that are gumming up the works.
After all, it's these folks that benefited from all the imaginary wealth that was bought and sold, so why shouldn't we take some of that funny money back and fix the problem?
Lessee, that's about 70 million from each of the top 10,000 taxpayers. Sounds like a good deal to me! Why should the 99.5% who didn't get hyper-rich from these schemes subsidize those that did?
(Numbers are approximate, but you get the idea.)

They think the price tag is the problem?

How does America keep voting for these people?

This is a confusing proposal with deliberately obscured costs.

The horrifying part is, it might pass due to lack of voter understanding.

The default for Americans seems to be if they don't understand it, others should decide the issue. May I suggest we start to reject anything that can't be clearly explained, even if it entails oversimplifcation?

As it stands, if I don't understand the proposal, I'm automatically assuming it will benefit their patrons MORE than 700 billion in unsupervised handouts would.

Further deregulation? It's like trying to save a drowning man by pouring buckets of water on him.

CVC: Bernie Sanders has proposed a five-year, 10% income surcharge on individuals making more than $1 million a year and on households making more than $5 million, which would pay for more than half the bailout.