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Thethreatofimpendingfinancialdisasterconcentratespoliticalmindswonderfully.OnThursdayagroupofCongressionalleadersheardHankPaulson,theTreasurysecretary,andBenBernanke,theFederalReservechairman,paintadireeconomicscenarioiftheydidnotapproveamoresweepingremedyforthefinancialcrisis.Studentandcarloans,notjustmortgages,wouldallbehardertoget.Theeconomywouldsinkintoasevererecession.Forthisreason,adhocresponseswillstillbecritical,suchlastweek’sfederalguaranteesformoney-marketfunds,Fedloanstobankstopurchaseasset-backedcommercialpaperand,onSunday,approvaloftheremainingtwobigindependentinvestmentbanks,MorganStanleyandGoldmanSachs,tobecomeFed-regulatedbankholdingcompanieswhoseinvestmentbankunitscannowborrowfromtheFedonthesametermsasotherbanks.ItcouldbesometimebeforetheTreasuryisabletopurchasemortgagesenmasse,andlongerstillbeforethatstartstoaffectthebroaderfinancialsystemandeconomy.Inthemeantime,thecrisiscouldclaimothervictims.
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