FEAR ITSELF.

Sebastian Mallaby has a sensible and calm column today on the various efforts being made to avert financial catastrophe and the likelihood that some of what we're seeing now is, to use FDR's term, fear itself. "We have gone from grappling with genuine financial challenges -- that mortgage loans are tumbling in value; that shrinking the excess borrowing in the financial system is bound to force asset prices down -- to grappling with the exaggerated terror that nobody is to be trusted. Banks won't lend to each other or to healthy companies even for short periods. Companies that have pre-negotiated rights to borrow are calling in the money, not because they need the cash but because everyone else is hoarding it." But the fact remains that the market his dived in response to every effort the government has made to give it some help. In this, it's been like nothing so much as a kid who's hungry but doesn't know what he wants, and keeps crying harder every time you try and offer something. Like the kid, the market can't quite seem to speak, and so no one quite knows what to do to help it.Which may mean that we can't keep asking it what to do, and so we do it ourselves: We nationalize the banks and just waiting for folks to settle down and decide they can trust each other again. meanwhile, Mallaby is arguing for a second stimulus package, and given his position on the center-right, that's something of a powerful indicator. This is one of those places where progressives should be working now to fire up their dream machines and figure out what they want in this package. Some of those agenda items will be good short-term policy -- getting money into people's hands quickly -- but some of them should have an eye towards the long-term. This is likely to be one of the most profound moments of public investment and regulatory change this country has seen for years, and using it to construct a real mass transit infrastructure, or a green energy sector, or a transaction tax, are things progressives should be gaming out now. They shouldn't be caught flat-footed by someone else's proposal, they way they were by the Paulson bailout plan. Crisis and opportunity and apocryphal Chinese characters and all that.Image used under a CC license from NeilT.