I read the news today oh boy

Pearlstein says some things that have been on my mind lately. His column today -- Gut Check -- says:

1. It's not a good time for vindictiveness, for revenge, for playing the blame game. He says: "You can try to prevent a financial meltdown or you can teach Wall Street a lesson, but you can't do both at the same time."

2. The US is really close to a massive cascade of bank failures. He says: "All it would take is one more hit to trigger the modern-day equivalent of a nationwide bank run. Financial institutions would fail, part of your savings would be wiped out, jobs would be lost and a lot of economic activity would grind to a halt. Such a debacle would cost us a lot more than $700 billion."

3. The bailout involves sales as well as purchases. He says: "The latest proposal hammered out between the Treasury and Democratic leaders won't cost anywhere near $700 billion unless we get a 1930s-like Depression, in which case we'll have much bigger problems to worry about."

4. Legislators should not pretend they are members of the executive branch. Nor should they use legislative oversight and the power of legislation to hamstring executive branch specialists. He says: "It is important to give the Treasury secretary and the people he hires a good deal of flexibility in designing and experimenting with the mechanics of this rescue."

The head of Bank of America gives weight to point 2. He says banks are hoarding cash, refusing to extend credit, and credit is what makes the economy run. His bank is sound and will benefit from the failure of weak banks (by buying up assets cheaply). Nonetheless he doesn't want banks to fail. There's a serious risk that the current economic pessimism will escalate into panic. He says: "Right now, the flow of funds that makes our economy run is threatened by a lack of confidence in the value of financial assets, particularly mortgage assets. Financial institutions are extremely hesitant to purchase assets or lend money to one another to fund the system. Just as optimism in times of growth encourages an upward trend, pessimism in uncertain times can feed a downward trend. Allowing such a trend to gain strength is our great risk." (Main Street Needs the Treasury Plan)

A Wall Street Journal blog says the political posturing of Southern Republicans in congress -- a populist melange of vindictiveness combined with grasping for a share in the payout -- is being quietly supported by McCain: "McCain didn’t create the House rebellion, but at least temporarily, we are seeing an interesting partnership between House Republicans and John McCain. When I asked one GOP Hill staffer whether McCain was serving as a proxy for House Republicans, I was told that such a claim would be too strong but that McCain is, at the very least, trying to give voice to House Republicans skeptical of the bailout. And if that’s true, McCain will have an opportunity to bring them along–or some of them–to get a deal.” (Political Wisdom: A Wild Day Spawns Questions About McCain)