The posts by Jamie Galbraith and Liaquat Ahamed together make a very strong case for a drastically downsized financial sector; as Mr Ahamed put it: "however we got here the eventual goal should be a financial system that is tightly regulated, boring and safe." Not surprisingly, this was the conclusion reached by the majority of participants at the Levy Economics Institute annual conference in the honor of the late Hyman Minsky, held at the Ford Foundation last week.

However, nothing but bad news continues to dribble out of Washington. For example, here is a recent headline: "Fannie Mae CEO Allison Nominated to Run TARP Office". As a former (successful) regulator put it, Mr. Allison's most recent accomplish was the destruction of Merrill Lynch "through nonprime CDOs -- Merrill actually kept many of the toxic CDOs it originated in its portfolio. The fact that he was brought into Fannie with regulatory blessing is the conclusive proof of why we need a new regulatory head for that agency. The fact that the administration is selecting him, after a track record of failure, to run TARP 2 is simply a continuation of the conclusive proof of that obscenity."

The ex-regulator continues: "At the Levy Institute Minsky conference, with diverse economic/trade viewpoints, the only defense of TARP 2 was by a consultant that said: of course it's a deliberately opaque taxpayer subsidy to bankers and rich investors -- it's designed to be. (With defenders like that, who needs critics.)" Further, as reported in the national media, Allison is a staunch supporter of outsized bonuses paid to those who contributed to the current global financial crisis: "Allison defended the bonuses in a March 20 e-mail to employees, saying that rescinding their retention agreements would be a "breach of faith" and would undermine the companies' efforts to shore up the housing industry."

Here is my worst nightmare: Treasury Secretary Geithner, advisor Summers, and Fed Chair Bernanke have signed a blood-brother pact to protect Wall Street at any cost. They are simply sharing the spoils, dividing government up among Wall Street's predators in a desperate attempt to restore Money Manager Capitalism. Some individuals will make out like bandits, but the effort will ultimately fail. The financial system WILL be downsized no matter how many trillions, or tens of trillions, Timmy, Larry and Ben funnel to Wall Street. In the process they will bring down Obama in a glorious restoration of "centrist" Republicans, rescuing us from the folly of big government. Since those Republicans have no clue what to do, expect an extended depression, accelerated concentration of economic wealth and power in the hands of a few remaining Wall Street firms, and the rise of an oligarchic plutocracy that will shame Russia's.

It does not have to be that way. President Obama can and should fire Geithner and Summers as quickly as possible. Unfortunately, he is stuck with Bernanke, but he can easily override him-Bernanke has no following inside Washington or on Wall Street, and contrary to conventional and outmoded thinking, the Fed has very little impact on the economy. Now is the time for bold action, including ramping up Treasury spending to save the economy. This time, let us get on the right side of the leverage. A dollar spent on new jobs will have a bigger pay-out than $30 spent protecting Wall Street bonuses. Money Manager Capitalism cannot be saved, and should not be saved. As Keynes said, the way forward is euthanasia of the rentier class-not the widows, orphans and other coupon-clippers of the past, but rather the Wall Street money managers that have emerged from the relative post-war stability created by the first New Deal.

It is time for a second New Deal, a better New Deal, along the lines formulated by Candidate Obama. The new president has very little time to take these steps. Unlike FDR, who came into office after the economic collapse, Obama is riding the wave of failures and will be blamed for them no matter how much he (rightly) points the finger at the previous administration. Paulson came sufficiently close to postponing disaster until Bush retreated to Texas that Obama cannot escape if the economy is not recovering by mid-term elections. As Alan Greenspan loved to put it, if history is any guide, recovery from a calamity this severe will not begin for many months. Indeed, a strong case can be made that most Americans will not celebrate a better economy for a half dozen years. That gives Republicans many years of monkey-wrenching in the hopes that they will recover both Congress and the White House.

In short, Obama might believe he is in a position similar to that enjoyed by FDR-if he can only attenuate the financial crisis, he will then be able to push his ambitious new proposals through Congress. More likely, he is in the Hoover hot seat-thrashing around for immediate baby-steps relief for an out-of-control collapse of Capitalism as we know it. The Big Ideas cannot wait-they are the immediate solution to our problems. Wall Street can wait. Let it stew in its own juices for a few years and attend to Main Street first.