No, but you ... you ... you're thinking of this place all wrong — as if I had the money back in a safe. The money's not here. Your money's in Joe's house, right next to yours. And in the Kennedy house, and Mrs. Macklin's house, and a hundred others. Why, you're lending them the money to build, and then, they're going to pay it back to you as best they can. Now what are you going to do? Foreclose on them?

— James Stewart as George Bailey in Frank Capra's "It's a Wonderful Life" (1946)

Financial crises nowadays are a little more complicated. Today, Bailey Bros. Building & Loan probably — and Mr. Potter, definitely — would securitize the mortgages on the homes in Bailey Park, packaging them with other debts as CDOs (or collateralized debt obligations) or CMOs (collateralized mortgage obligations) and selling them to investment banks that would resell them to institutional customers. The CDOs would be "tranched," meaning they have different maturity dates and risk levels.

Smart customers would hedge their debt through a monoline insurance company such as an arm of American International Group, which would issue guarantees called credit wraps or credit default swaps. AIG would assume the risk on the fixed-income securities by underwriting their credit worthiness.

Lots of people on Wall Street got hugely rich precisely this way, essentially by doing nothing more than betting that Joe and the Kennedys and Mrs. Macklin were going to continue making their monthly mortgage payments. They invented all sorts of exotic parlays, called "derivatives," that stacked risk upon risk, all of it predicated on houses in Bailey Park and a million other places.

Many of today's mortgage companies didn't know their customers as well as George Bailey did. Nor did they demand collateral and proof of credit-worthiness, as old man Potter did. Instead, they lent to people who couldn't repay, particularly not when the economy slowed down and the housing bubble burst. Investment houses such as Lehman Brothers and Bear Stearns, which bought a whole bunch of CDOs and CMOs, and AIG, which owns $450 billion worth of default credit swaps, turned belly-up.

In the immortal words of Uncle Billy Bailey: "This is a pickle, George. This is a pickle."

On Thursday morning, another George — that is, President Bush — made a brief statement about the pickle. He said, "The American people are concerned about the situation in our financial markets and our economy, and I share their concerns."

As a statement of confidence, this wasn't exactly, "We have nothing to fear but fear itself."

Like the rest of the nation, Bush has no idea what's going to happen next. The stock market, having plunged nearly 900 points from Monday through Wednesday, recovered its footing Thursday with the Dow Jones industrial average closing up 410 points.

But other investors continued spurning anything remotely exotic, preferring boring old T-bills and gold. That safest of havens rose $46.50 an ounce to $897, up $116.50 in two days.

Meanwhile, conservative Republicans began bashing the Bush administration for its decision Wednesday to bail out AIG. Sen. Jim Bunning, R-Ky., went so far as to compare Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson to Venezuelan president Hugo Chavez. The only difference, Bunning said, was "that Chavez doesn't put taxpayer dollars at risk when he takes over companies. He just takes them."

Lehman Brothers, which sought Chapter 11 bankruptcy protection Monday after the government declined to step in over the weekend, must be wondering what it did wrong. Bear Stearns got a bailout, Merrill Lynch found a suitor, Fannie Mae and Freddie Mac got nationalized and the Big Three automakers may yet get the $25 billion in loan guarantees they want from Congress. AIG, being judged critical to world financial markets, also got loan guarantees. Only Lehman Brothers was left to contemplate the realities of moral hazard.

Clearly, this ad-hoc approach — some live, some die — does nothing to reassure the markets. That's why news that the Fed and Treasury are considering creating an entity to oversee the reorganization of financial markets comes as a relief. It would be the Resolution Trust Co. — the entity that was created after the savings and loan debacle of the 1980s — on steroids. A systematic approach run by old-school bankers according to strict rules could return a measure of confidence to the battered system.

Here's where this entity should start: When money is borrowed, there should be something tangible to back it up, something not leveraged 40 times, something more than the full faith and credit of the United States Treasury. That's already pretty badly extended.

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