So just how bad is the financial crisis?

If the bailout isn't approved soon -- very soon -- look out for a deep economic depression that could last maybe a decade. That's the assessment of the Washington Post's Steven Pearlstein this morning. From left to right on the opinion spectrum, there's the same dire assessment. But is it really that bad?

David Cay Johnston, a former New York Times reporter, says no. Johnston is not just a journalist sounding off. He's an expert on tax and economic policy and a Pulitzer prize-winning investigative reporter with 40 years' experience.

In the linked interview, Johnston says journalists should dig to the core of the financial crisis:

"No one I've seen has asked the Treasury, did you ask every bank to submit to you data on how many illiquid assets you have, what you bought them at and what you value them at now? That might identify the problem is concentrated in a handful of banks."

America won't bail out Wall Street

The defeat of the bailout in the House means that the authors of this defective, bungled legislation will have to do a lot better. The basic problem is not House Speaker Pelosi's ill-timed accusations against the Republicans, or Minority Leader Boehner not corraling more GOP members -- it's the bailout bill itself.

Americans, whether they're on Main Street or in academia and the think tanks, don't, for the most part, don't want a "bailout" of Wall Street. They want the Street to go through a "workout." They're not emotionally reacting to punish Wall Street. What they want, which is difficult to communicate accurately in the inflamed atmosphere, is a process that will deliver results based not on hysteria but reality, however fugitive reality may be right now. Yes -- inject money into the financial institutions that can cope with their problems if they can buy time till housing prices increase enough to make their most shaky mortgage securities stable. The only alternative for the weakest institutions is for them to go under. In which case they can be bought out, again with government assistance, to the extent that's necessary to protect homeowners.

The current bill, despite the massaging it received in House and Senate negotiations over the past several days, doesn't go this route. It remains essentially what Treasury Secretary Paulson crafted. Not surprisingly, Paulson, the former CEO of Goldman Sachs, came up with a bailout instead of a workout.

A bailout won't make it. Who will show the leadership to come up with a legislative solution that lets Wall Street work out its problems instead of being bailed out?

Obama, McCain, are you listening to America?

A bold move that this time could help McCain

As Obama opens up bigger leads in national polls, like this 8-point margin in the Gallup Daily Poll -- what will McCain do? He likes to take bold moves -- like naming a popular, contrarian but mostly unknown Alaska governor, Sara Palin, as his running mate, or suspending his campaign to promote congressional enactment of the bailout to free up credit and soothe the markets.

Neither of these moves had a Houdini-like effect on the campaign -- most likely because they weren't carefully thought out (something you could never accuse Houdini of). ln the current circumstances, McCain has no choice but to stay bold, but with more tactical care. The financial crisis has benefited Obama, even though the Democratic candidate isn't doing much to capitalize on his gift. As the bailout compromise legislation heads toward a vote, McCain should go all out to point out what he thinks are its defects. If he believes the compromise still rewards Wall Street at the expense of Main Street, he should say so. And, on Wednesday -- when the Senate vote is scheduled -- he should be in the well of the chamber, calmly but firmly spelling out his concerns and objections, even if he ultimately votes aye.

In truth, the bailout, despite the massaging that the legislation has produced, is flawed, perhaps fatally. It would not be reckless or "political" for McCain to question the current language. "Bailout" is the wrong solution to the crisis. What's needed is a workout, as I argued last Tuesday. McCain should go after this core weakness of the legislation If he loses in Congress -- which he is more than likely to do -- he may win in the court of public opinion and help his faltering campaign.

Voters are still trying to get the measure of the presidential candidates. By taking a courageous stand on the massive federal forgiveness of Wall Street recklessness, McCain can clearly reveal how tall he stands.

The bailout: Big crisis, small thinking

As the $700 billion bailout (such a terrible word to sum up the crisis this country is in) gets parsed into legislation, Americans are pausing to wonder not only whether the financial crisis will be fixed, but where are we...as a nation -- as a confident nation that's always been optimistically poised toward the future. Except recently.

Peggy Noonan picks up on that unique but now Xerox shadow of our national characteristic:

"If nothing else, this [crisis] means we must now have our fights over big issues, issues of real consequence that are pertinent to the moment we're in. We shouldn't be fighting and hitting each other over the head over little things, stupid things, needlessly chafing ones."

In retrospect, it is shocking that we didn't use the dark time of 9/11 to light more candles. Properly, we committed ourselves to creating a country that would be safe from terrorists. But we didn't commit ourselves to building an America that would be stronger in other ways. We didn't make a long-term investment in people and physical assets -- the bulwark against any enemy, known or unknown. Instead, Washington invested in deregulation. The result was an army of mediocrities with MBAs getting their green belts as mini-Masters of the Universe on Wall Street. Now most of the Masters, mini and major (excluding those of the hedge funds in Greenwich, Conn., as Tom Wolfe points out), have fallen. But who will succeed them to lead the rebuilding of America?

The bailout -- that terrible, here's-your-crutch word again -- proposes to extricate us from the mess of underwater securities -- but where will it take us? The wheels of credit will be greased again, but where will the credit go, particularly in the sphere of public benefit?

It's amazing to me that most of the participants in the bailout -- Democrat and Republican alike -- don't see this moment as a defining one -- not just for Wall Street, or Main Street, but for America as a nation and people.

Why aren't Obama and McCain shaping the bailout?

Senate Majority Leader Reid disinvited Obama and McCain to be part of the bailout negotiations. But why? One of them will be the next President, in fewer than four months, and spending much of his time coping with the impact of the bailout.

McCain apparently did insert himself in the counter-negotiations of the Republican minority, but reportedly without taking a clear stand. Obama, while saying the bailout should not reward executives whose companies unload underwater mortgage securities, has not offered any specifics regarding what enabling legislation should or shouldn't include.

But with Treasury Secretary Paulson and his team and congressional leaders so unsure of the consequences of the legislative package they're wrapping up, Obama and McCain should be involved to the point of putting their clear and indelible stamp on the results. If they aren't, if all they do is vote aye or nay in the Senate Sunday night or whenever the legislation goes to vote, the one of them who wins the election will be a damaged President from the day he's inaugurated.

Are we really at the edge of a financial cliff?

We keep being told how dire the financial situation is. But then Warren Buffett steps up with a $5 billion investment in Goldman Sachs -- a drop in the bucket compared to the proposed $700 billion bailout -- and the markets respond warmly.

Mutual funds and institutional investors are the majority stockholders in U.S. companies. While they are not immune to panicky thinking, their job -- their responsibility -- is to make decisions that will protect their multibillion-dollar investments. A sustained sell-off is not a protection strategy.

Congressional leaders are beginning to communicate that the narrow-based bailout hurriedly concocted by Treasury Secretary Paulson & Co. is a non-starter. But at the same time they should emphasize they're dedicated to crafting a more comprehensive solution to a crisis that's bigger than so-called toxic securities and a potential credit seizure. That solution should include Main Street as well as Wall Street, and provide at least a template for long-term investment in America's human and physical resources.

The crossroads that we're at is not just saving the financial system, but all the pillars of the economy -- infrastructure, education, health care, as well as credit facilities.

If doing this takes longer than a few days -- which it will -- so be it.

We need a 'workout,' not a 'bailout'

Skepticism about the Paulson bailout is swelling. But what does it mean -- that Congress will go through a limited-hangout of grumbling, and then cave in? We are told that if a drastic bailout doesn't happen soon, the entire global financial system will go kaput. But why does a rescue have to follow the Paulson lose-you-win prescription? Instead of a bailout, why not a workout? Why not bring everybody together -- Wall Street, Main Street and Washington -- to agree to a plan that would achieve the desired results. That's two big challenges: Blunting the panicky run on the financial system that, sooner rather than later, might collapse it, and creating a template for long-term investment in our country's human and physical assets?

The financial situation is bad, but is it a precursor to the total disintegration that occurred in the Great Depression? Back then, stock was owned primarily by wealthy families. There were few mutual funds or institutional investors. In other words, the government could do nothing but jaw-bone that things would get better -- which is what President Hoover did. The stock-owning families, having no recognized community of interest, caved -- sometimes literally out of windows. But today most stock is held by mutual funds and institutional investors. While they are not immune to panicky fears, they could be reasoned with if the pitch came from all the major interests.

Why not create a "trust" consisting of key government players -- including Treasury and the financial and housing oversight agencies -- and Wall Street and Main Street. This trust would structure not a "bailout" but a "workout." A workout would require everyone to tighten his belt for a few years until economic circumstances improved, and the "toxic" loans became healthy ones. The federal government would provide a flow of funds to financial institutions that showed responsibility in trying to solve the crisis -- loan by loan, month by month. If we can't agree that's possible, then we have no faith in capitalism. At that point, why not turn the country over to a Chavez or Castro?

If you want to do a little history on bailouts, go back to the Emperor Hadrian, who, in 118 A.D. forgave a huge amount of taxes owned to the empire's treasury by the big guys. It didn't work. Rome's decline continued. Marcus Aurelius tried another bailout toward the end of that century. Didn't work either. Someone might say, hey, Rome kept going for many years after Hadrian and Marcus Aurelius. But reread Gibbon, and get a renewed feel for the brutish -- hellish -- life in the empire during its last 200-plus years. Do we want to bequeath to our children and their children that kind of life?