One step to consider now would be to provide financial institutions with liquidity by having the Fed buy nonliquid, asset-backed paper for realistic discounted market prices so that the speculators and the banks would pay for their bad behavior by realizing their losses. The banks don't want to show these losses, but at least that would help restore additional liquidity to the banks.
The banks alone did not create the meltdown mess. The American public played its role when it turned from saving to borrowing, going on a consumption binge based on credit rather than earnings and then borrowing against its rapidly appreciating housing assets. Many people cheated on their mortgage applications, especially loans that required no verification of the borrowers' income or net worth, which infamously became known as "liar loans." And let's not forget the regulators from the Securities and Exchange Commission on down who failed to police these activities, or the lawmakers who failed to adopt new rules to prevent the side effects of increasingly complex financial innovations. They failed to understand that, cumulatively, this posed a "systemic risk." Congress itself, now busy pointing the finger, was grossly negligent in failing to rein in Fannie Mae and Freddie Mac, which congressional Democrats saw as honey pots for their party colleagues and as sources of campaign contributions.
This administration loses rather than gains when it gives the impression that it is putting politics ahead of policy, staying in a campaigning and not a governing mode, and attacking the business world as a political tactic. In the end, the American people are going to demand: Where are the jobs? Unemployment is the leading indicator when it comes to politics. Jobs, jobs, jobs must be the No. 1 challenge, and antibusiness rhetoric is not going to help.
This is the time for wise policy, not smart, showy politics. It would not serve the country if Obama swung for his second trapeze and it wasn't there.