Warren, I Know You're Listening.

With whom will the new president replace Hank Paulson, and can he maybe get started on it today? Really, if the stakes here were not so high we could say that Paulson is an embarrassment and leave it at that, but with our economy crumbling around us his ability to steer us out of this crisis, or lack thereof, needs addressing today. The administration now seems to be aiming the spotlight on an assistant Treasury secretary, Neel Kashkari, to describe how the US will also use the $700 billion “rescue” package to implement the same action so decisively taken by Britain and swiftly followed by the rest of Europe: equity injections. Perhaps that is because yet another change in direction, even if this may hopefully be the right one if delivered in concert with the EU, will not pack much of a punch coming from Paulson’s mouth.

As many economists have recommended from the outset of this financial crisis, the U.S. appears to finally be on board with the concept of injecting capital into banks and financial institutions in exchange for a proportional equity interest. Some conservatives have resisted this because it is an obvious slap in the face to their ideology – there is no room for government intervention in the free markets, and particularly not when it amounts to the “nationalization” of these entities. However, it has become clear in the last few weeks that all bets are off now with respect to what amount of government intervention is appropriate or necessary to salvage the American economy.

Isn’t it possible that allowing the government to take equity in the companies it bails out could ultimately cost the American taxpayers less money? Companies that were all too happy to take the handout of Uncle Sam Fed liberating them from their “toxic” assets might be more willing to search around for creative solutions when faced with the possibility that the government might have any say in the governance of their companies. When Sweden faced this problem in 1992, its decision to take equity positions in the companies to which it provided money caused SEB, Sweden’s largest bank at the time, to find it within itself to seek other sources of capital – and it turned a profit the next year.

Oh, so much potential disaster to think about if none of this “rescue” stops the mess from flowing through like lava into the economy. But the bright side if McCain and Palin win the election is that a Vice President Palin can teach us all how to skin our own animals – we’ll need that ability.