The origin of this "credit crunch" goes back to the Clinton years. Democrats especially, pushed for government to force banks to make loans to those the banks thought unqualified. Hence, they made laws and rules to that effect. Now many of the loans made between then and now are in trouble. Those who received some of these loans were poor risks, and are not repaying the loans. The bad loans put the banks in trouble, because they aren't recovering the money they loaned out. That means they can't repay their depositors. Four years ago, John McCain saw this coming, and urged new regulations for Fannie May and Freddie Mac. He said that if this were not done, that the taxpayers would end up stuck with the bill for these bad loans. Democrats in Congress fought against his idea. They said everything was fine with Fannie and Freddie. It wasn't, and McCain has been proven right. Meanwhile, two of the men who made millions while in prominent positions with those entities, are now "economic advisors" to Obama. I would say, that's putting the fox in charge of the hen house. My wife puts it differently:  that's putting the inmates in charge of the asylum.

I'm not convinced that the government bailout is the right thing to do. Aside from that, however, is the question of how the bailout money is used. Using it to buy stock in the banks is the wrong way to go. First, it points the way toward nationalization of the private banks--socialism. Bush says the government ownership of this stock is temporary. He does not intend to nationalize the banks. But Bush will only be in office for another three months. Second, it does nothing directly for the credit market. Buying stock may help the stock market, but it does not add liquidity to the credit market. It could only add liquidity, if this were newly issued stock purchased directly from the banks. That, of course, would dilute the holdings of current shareholders.

The big question is, what would that $700 billion dollars do for the economy, if left in the private hands of the taxpayers? We don't know, because whatever they would do with it will be prevented. There's a good chance that it would do more good.