The Bush/Paulson bailout bill was defeated in the House on Monday, which leaves me somewhat relieved. My relief comes not from a knee-jerk distrust of government intervention. Nor does it come from a simpleminded hope that the economic mess will just sort itself out and all will be right in the world. My relief, temporary though I suspect it will be, arises from a belief that complex problems require well thought out solutions.

The bailout plan, which the Bush administration claims to have been working on for months, is not a well thought out solution. The initial version of the plan was three pages long. Three pages. Now I am not a fan of being verbose just because you can be, no matter how long winded my blog posts seem. But three pages? If you are trying to convince people to spend $700 billion, wouldn't you put together a big document with supporting evidence and argument, maybe some charts and tables? Maybe the executive summary would be three pages, but you need backup for that kind of spending. Hell, you should have backup to spend $1 billion even if people trust you and this administration has squandered any trust they once had. Even the $700 billion number was plucked out of thin air.

But we need to hurry, right? This is a CRISIS! We can't stop to think!

Wrong. Come on, people, remember some Kindergarten lessons here. What do you do when the fire alarm goes off. Walk, don't run. If you run, you fall over each other and people get trampled and you make the problem worse.

The credit crisis, for lack of a better name for it, is not just a problem of bank liquidity and interbank trust. The problem has many roots: a culture encouraging people to live beyond their means, financial institutions passing their risk off to each other as bundled derivatives that nobody really understands, bankruptcy law changes combined with poor lending decisions, the outsourcing of jobs and manufacturing overseas, insane payments to the executives of banks (and other corporations) with no performance basis. We are in trouble across the board. We have given away our jobs, debt-enslaved our citizens, made the complex world of finance even more so, and heaped riches on those causing the problems.

But $700 billion will solve all this? No. We need to address the myriad causes if we want to have a chance to rebuild our country's economy.
Sheila Tendy has some good ideas. Sweden handled a similar crisis in 1992 and we could learn from their lessons. (I've seen other batches of suggestions that I can't seem to find at the moment - I'll add them if they turn up.) Ideas are out there, but someone in the government needs to provide the leadership to put them together into a coherent plan.

As far as the urgency goes, we do not have to come up with a solution right now, although we do need to be working on one. If we need to take some stop-gap steps while we work on a real plan, so be it, but we should not rush to just throw a bunch of money at it in the hope that it will help.