Don’t panic

Atrios nails it:

No, the fact that a highly regulated bank was, as prescribed by law and regulation, seized in an orderly fashioned and sold off with no cost to taxpayers is in no way a "wake-up call" suggesting that Congress needs to give large amounts of money to the largely unregulated shadow banking system.

ETA (from Hunter):

Is that the best approach? I’m not convinced, and I’m more than a little angry at the Democrats for, once again, accepting what they are given and trying to tweak it rather than coming up with true counterproposals. Propping the housing market up from the bottom may be much cheaper than trying to prop up the entire derivatives market from the top, and would seemingly have the same stabilizing market effects. Taking equity in firms in exchange for taking their crappy, non-marketable products would, yes, seem the absolute least we could do — there must be an upside for the taxpayer in providing this trillion-dollar investment at the expense of ballooning our national debt and crippling public sector works for a decade or more. But that’s still weak tea, all things considered.

Not being talked about as much, though, is that we must allow overextended companies to fail. It is an essential part of our economy that economy-threatening recklessness on the part of speculators not be rewarded, and especially not be rewarded by the government. Any actions to stabilize the economy should indeed inject liquidity — but it’s not clear that injecting liquidity through the very companies most in trouble is sustainable or even rational.

More than that, I think Americans can and should be quite furious at the way this extraordinarily business-friendly proposal has been steamrolled through under premise of imminent crisis, with no serious debate of any more balanced alternatives. It is another black mark in the legacy of the Bush years — for both parties. If the Congress really passes the Paulson plan with, as it looks now, absolutely no substantive debate of alternative plans, it has once again shirked its most basic duties, and is an embarrassment to the nation it supposedly represents.