The economy is bad. But, it’s not bad enough and we don’t have a smart enough group of people that can   agree to circumvent any such vetting process that should come about when deciding upon the fate of the largest   financial bailout in United States history.

The financial crisis, in terms of bailouts and government-sponsored goodies, began back in March with Bear Stearns, the investment bank that in a weekend somehow went from having copious amounts of capital to having none at all. Then, the government shied away from an all-out bailout, merely providing guarantees and letting JPMorgan Chase sweep up the bits and pieces for only $2 a share.

It then resumed in the summer with Fannie Mae –– the Federal National Mortgage Association –– and Freddie Mac –– the Federal Home Loan Mortgage Corporation –– crying wolf. These financial institutions began flying under the wing of the government in July when the Treasury Dept. orchestrated a rescue plan on their behalf. Though Freddie and Fannie had not yet failed, their stock had dropped between 70 and 80 percent by the time the government was poised to intervene.

Alas, the government intervention didn’t really work –– neither Freddie nor Fannie mustered the capital necessary, via loans, to survive –– and investors got really scared. Economists around the globe and, especially here at home, unanimously agreed that the situation involving Fannie and Freddie necessitated government involvement. As much as they disliked the government meddling in private finance, none were reluctant to allow the government to fork over the money required to keep these firms afloat, essentially giving the government carte blanche to seize control of the companies and turn them into dreaded Government Sponsored Enterprises (GSE’s).

Three weeks ago, the third episode in the financial crisis began when Lehman Bros., a leading global financial-services firm, put itself up for sale after reporting a staggering $4 billion loss. The government decided against a bailout and, scared that a Lehman Bros. failure would create a shockwave effect in the mortgage-backed securities market, Merrill Lynch quickly agreed to a buyout by Bank of America.

The next victim would be American International Group (AIG). The insurance giant found itself between a rock and a hard place when investors began comparing the securities it held to those of Lehman Bros., who had declared bankruptcy the week before. Its stock dropped nearly 95 percent and its assets consequently became illiquid (i.e. they couldn’t be readily bought and sold because their value had tanked by so much).
Last Tuesday was not Black, but it was bleak. After Treasury Secretary Henry Paulson Jr. called for a $700 billion bailout plan a week before and had been lobbying anyone in sight to subscribe to it blindfolded, his plan   failed to pass the House on Monday. That day, the stock market recorded its largest-ever one-day point drop: 777 points. Lucky number? Guess again.

Mr. Paulson’s plan, will go to Senators again on Wednesday for what he hopes won’t turn out to be a replica of Monday.

His plan is notable not only for what it asks, but for what it doesn’t return. He asks that U.S. taxpayers put $700 billion in his hand so he can have money available to shore up any future firm failures and troubled investments. But he doesn’t give the providers of this capital, the U.S. taxpayer, any stake in stock. If we look at this from the perspective of an investor, you can’t help but laugh at his proposal.

Mr. Paulson thinks the average American Joe shouldn’t think of their tax dollars, which will serve as capital to for the government to buy stocks, as an investment. I don’t think he could be more obtuse.

The plan formerly included a provision that leaves the bailout completely in his hands. Paulson, who perhaps isn’t the best at using his discretion, thinks that we should give him –– yes, him, not the government as a whole –– a blank check to fill out whenever he deems necessary. No Congressional oversight, no judicial oversight, no way. Democrats and Republicans alike didn’t like that idea.

The bailout plan now has a slightly different shape, but not by much. The Senate version of the plan gives tax breaks to businesses that produce, use, research or develop alternative energies and provides higher government insurance for bank deposits. It’s better, perhaps not any better than the House version, but it’s not close to what it could be.

Weather you like it or not, the bailout plan is necessary. We are amidst a credit problem and, hence, a confidence problem. The solutions will be touchy and feely: a little for securities here, a little out of exorbitant severance pay there. But when it really comes down to it, all we’re trying to do is give people something to bank on. Because if one bank stops lending to one business or one mortgage company, a downward spiral begins.

Hopefully it’s apparent by now why we can’t rush into things as quickly as Mr. McConnell would like. The U.S. economy should have already had three fire extinguishers, five smoke detectors and ten fire blankets in its kitchen before it caught on fire. Thanks to Alan Greenspan & Co., these were slowly removed throughout the last decade. We can’t let Mr. Bernanke make the same mistake.