The great unwinding of our governmental competence is finally complete. Having mis-managed the FDA, FEMA, the SEC, the war on terrorism, the Justice Department, and US-Russia realtions, just to name a few areas, this week we failed to respond to the global economic meltdown. We failed on many fronts -- we didn't see it coming, we exacerbated a bad situation by giving the financial markets more, rather than less, freedom -- but I never expected this administration (the one that invented the term "death tax" and presented the proposal to strip away meaningful environmental protections as "The Clear Skies Initiative") to lose a battle because they framed it wrong.

Really, did we ever expect popular support for a "Wall Sreet Bailout"?

By now, we all recognize that we face a crisis. I happen to beleive it's much more a crisis of confidence than a crisis of fact, but it's a crisis nonetheless. Either way, as both Presidential candidates have said, inaction is not an option. At such a crucial time, not only did our economic leaders, Ben and Hank, try to solve the problem with a 3-pager, crafted while watching the NFL a couple of Sundays ago, but they failed miserably to understand how to get their idea passed. Here are a few things they might have considered:

1. It's an election year. Should it be a surprise that virtually every "no" vote in both the House and Senate came from a legislator in a close re-election race?
2. $700 Billion is a lot of money. Should it have been a surprise that folks would like some explanation or, God forbid, a moment to consider it?
3. We're only motivated by fear when the messenger is credible. Most people don't now beleive our economy will grind to a crawl as a result of failing to pass this legislation any more than they beleive Iraq has weapons of mass destruction, or that Iraq was connected with 9.11, or that Brownie was doing a good job. Fool me once, shame on me...
4. At a time when we can't afford a gallon of gas, we find it hard to feel bad for billionaire bankers. I understand that we're all hitched, says John Q. Public, but why do they get bailed out when struggling homeowners don't?

Let me be clear here: I don't agree with the bailout, either. I think the way to address the crisis is to address the underlying flawed assets: the shaky mortgages. As we now know, most mortgage-backed securities have been discounted significantly on the balance sheets of the financial firms, according to the "mark to market" accounting principles. Lehman, for example, had valued these assets at less than 1/2 of the original market rate... making the assumption of massive foreclosures on their underlying portfolio. I think that's easy to address, without using taxpayer money and without allowing the lenders to step away from their own bad practices: require the banks to re-structure every troubled loan. A year ago, Mr. Paulson made a very big deal out of the "voluntary" program he hatched to do just this. Now, make it manadatory. In short order, with the threat of default gone, the banks' balance sheets would be once again healthy and the liquidity and credit crisis would disappear.

Of course, our government no longer exists for the benefit of the people. It exists now to serve businesses. So, the only plan we have to consider is the $700 Billion -- actually, based on last night's Senate action, it's now $800 Billion -- Paulson/Bernanke proposal, which has grown from 3 to 400 pages and, supposedly, has many protections against excessive CEO compensation and adequate provision for appropriate Congressional oversight (given our track record in this area, I'm sure that will work well...) So, if this is all we have, why not focus on the only benefit it has by framing it so we can support it? It's an investment in our economc future. It's not a bailout, it's not even a "stimulus package" (which was a great idea, wasn't it? Are you enjoying your flat-screen TV...?) It's an investment.

Here's why it's a good investment: These assets that have been written down to 1/2 or less of their original value? There's virtually no chance they will end up anywhere near that bad. Do you know what the foreclosure rate was in the US from 1931 to 1935, the peak of the Great Depression? 1%. Really, 1%. Now that number was made artificially low, because -- here's a good idea -- the banks were forbidden from foreclosing under most circumstances. (Remember that cool idea, "Government for the people..."?) But, let's assume the foreclosure rate would have been higher without the governmental intervention... let's say it would have been ten times higher! OK, that's 10%.

So you see where I'm going with this. If we can buy these assets at their discounted current value, we create a floor for the financial institutions -- nobody has to worry that this could get even worse -- and we create a tremendous upside for the taxpayer, because the actual mortgage failures will almost certainly be fewer than now projected. Now, can you support a good investment in our country's economic future? Will you vote for the Taxpayers' Investment Initiative?