There is something that could be done to step in and mitigate the crisis. It will not seem like mitigation when it is done, but we are in a situation that takes two steps back before we can take four steps forward. When I wrote previously about what needs to be done to start fixing the economy, I wrote the following:
When you do that research, you immediately come upon one Paul Volcker. Volcker was chairman of the Federal Reserve from 1979 to 1987. Volcker correctly deduced in 1979 that the remedy was to limit the growth of the money supply and allow interest rates to rise. This solution, which is the only one that will work in a serious stagflation situation, will result in several years of massive unemployment and even deeper negative GDP growth. It takes money out of people's hands causing both of the things that you need to happen to effect recovery. It causes the supply of goods to rise because people don't have the money to buy them and as a result start to conserve resources, and the reduction in money supply bolsters the value of the nation's currency. These twin powerful effects drive prices down and create the conditions where recovery can happen, but as I said above, it takes several years for this to work. When they read this, I am sure many people will think of the saying "The cure is worse than the disease" and it almost is. It is also the only thing that will work and the sooner it is applied the shorter the duration of the stagflation.
The current crisis is absolutely the result of Republican policies of the last 40 years which have been universally anti-regulation on the banking and financial industry (and anti-regulation of probably every other industry as well). Every 9 years, we see why the banking and financial industry needs regulation. We had the Savings and Loan and Junk Bond Crises of 1986-1991 brought about by Brokered Deposits and risky loan practices. We had the tech bubble that burst in 2001 and now in 2008 we have the sub-prime mortgage disaster.
All of these issues could have been avoided and each threw the entire economy into crisis. This is not an industry that can police itself, and yet McCain, Bush, and the rest of the Republican Party continue to operate as if it can. The economy lost between $500 and 700 Billion dollars yesterday. When I say the economy, I mean everyone who has a 401K, everyone who has stocks, bonds, etc. Everything about the economy has gotten worse under 8 years of a Republican President and six years of a Republican congress of which John McCain was a prominent part. Its time for a change and Barack Obama is that change.