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Your top financial/economic experts, supposedly the MOST economically enlightened and savvy of financiers, come to you and tell you ours and the global economy will collapse imminently, if something isn’t done immediately by the government.

I guess skeptics, BDSers, and conspiracy theorists would expect that, suddenly shocked with this doomsday scenario, Pres. Bush, who’s not an economics professor or expert, would refuse to assist and cooperate on crisis resolution.

Hindsight is 20/20.

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* SEPTEMBER 20, 2008

Shock Forced Paulson’s Hand
A Black Wednesday on Credit Markets; ‘Heaven Help Us All’

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Excerpt:

The Fed, meanwhile, was supposed to be a lender of last resort to banks. It wasn’t built to fix all these problems, and the snowballing crisis worried Fed officials.

“This financial episode is one where a huge part of the problem is outside of the banking system,” said Frederic Mishkin, a Columbia University professor who recently left the Federal Reserve as a governor. “We’re in a whole new ball game.”

On Thursday, Messrs. Paulson and Bernanke decided to ask Congress for authority to buy up hundreds of billions of dollars of assets. In the afternoon, Mr. Paulson, Mr. Bernanke and Securities and Exchange Commission Chairman Christopher Cox briefed President Bush for 45 minutes.

Mr. Paulson told Mr. Bush that markets were frozen and many different types of assets had become illiquid, or untradeable. Messrs. Paulson and Bernanke told the president that the situation was “extraordinarily serious,” according to a senior administration official.

“We need to do what it takes to solve this problem,” Mr. Bush replied.

That evening, during the meeting with Congressional leaders, Mr. Bernanke gave a “chilling” description of current conditions, according to one person present. He described the frozen credit markets, busted commercial-paper markets and attacks on investment banks. The financial condition of some major institutions was “uncertain,” he said.

‘Uncertain Fate’

“If we don’t do this, we risk an uncertain fate,” Mr. Bernanke added. He said that if the problem wasn’t corrected, the U.S. economy could enter a deep, multi-year recession akin to Japan’s lost decade of the 1990s, or what Sweden endured in the early 1990s when a surge in bad loans plagued the economy and sent unemployment to 12%.

One lawmaker asked whether the solution will prevent bank failures. Mr. Paulson said it will stabilize markets. “But we’ll still see banks fail in the normal course,” he said.

On Friday, Mr. Paulson announced plans for a sweeping program to take over troubled mortgage assets. “The federal government must implement a program to remove these illiquid assets that are weighing down our financial institutions and threatening our economy,” he said at a press conference. He said he would work with Congress over the weekend to get legislation in place next week.

During a round of briefings on Friday, Messrs. Bernanke and Paulson chilled lawmakers with their dire warnings about the cost of inaction. They had already taken additional steps, including new measures to unfreeze money-market mutual funds and an SEC plan to temporarily ban short-selling.

http://online.wsj.com/article/SB122186563104158747.html