Do we have a "Plan B"?

Chart: NYTimes

I'm starting to hum "Remember My Forgotten Man" and "Blue Skies" and screen all those Depression-era films in my head.

I guess the big bailout package wasn't the be-all and end-all, after all. But wait! There may be some hope...

Here's Krugman and he's pretty shrill:

The response to this downward spiral on the part of the world’s two great monetary powers — the United States, on one side, and the 15 nations that use the euro, on the other — has been woefully inadequate. [...]

The United States should have been in a much stronger position. And when Mr. Paulson announced his plan for a huge bailout, there was a temporary surge of optimism. But it soon became clear that the plan suffered from a fatal lack of intellectual clarity. Mr. Paulson proposed buying $700 billion worth of “troubled assets” — toxic mortgage-related securities — from banks, but he was never able to explain why this would resolve the crisis.

What he should have proposed instead, many economists agree, was direct injection of capital into financial firms: The U.S. government would provide financial institutions with the capital they need to do business, thereby halting the downward spiral, in return for partial ownership. When Congress modified the Paulson plan, it introduced provisions that made such a capital injection possible, but not mandatory. And until two days ago, Mr. Paulson remained resolutely opposed to doing the right thing.

The British, Krugman explains, are taking the lead and doing just that: injecting ₤50 billion with interbank transaction guarantees. Hopefully, Europe and the U.S. will get on board with similar and coordinated plans.

They will have the opportunity this weekend with two important meetings scheduled of top international financial officials on Friday and the annual IMF/World Bank meeting the following two days. Krugman warns that they must seize this chance to forge a global rescue plan that they agree upon in principle, at least.

What should be done? The United States and Europe should just say “Yes, prime minister.” The British plan isn’t perfect, but there’s widespread agreement among economists that it offers by far the best available template for a broader rescue effort.

And the time to act is now. You may think that things can’t get any worse — but they can, and if nothing is done in the next few days, they will.