It is not usually easy to agree with President George W. Bush of the United States of America, whose swaggering gait is pure metaphor for how he has shaped US policy these past seven years, mostly with dire consequences at home and abroad.

But Mr Bush is right, America needs a Finsac; that is, their version of a trust to intervene to prevent a broader meltdown of the banking sector after the collapse this past week of some of the most venerable and iconic names on Wall Street.

Indeed, the Treasury Secretary, Henry Paulson, and members of Congress, were, over the weekend, crafting the outlines of the facility, which will inform legislation to give Mr Paulson and the administration the authority to proceed.

Huge cost

But this will not come cheaply to America's taxpayers. The early estimates are that it costs perhaps three-quarters of a trillion dollars to buy up subprime mortgages and other esoteric instruments that brought down Bear Stearns and Lehman Brothers, drove Merrill Lynch into the arms of Bank of America, forced the Federal Reserves' $85 billion prop-up of American Insurance Group and triggered nationalisation of mortgage backers Freddy Mac and Fannie Mae..

The meltdown is America's greatest crisis since the stock market crash of 1929 that ushered in the Great Depression, and this is the greatest intervention by the government into the US economy since FDR's New Deal of the 1930s and '40s that helped pull America out of its slump.

It can't be good news to the ideological purists, who will inveigh against - and don't snicker - George Bush's socialistic intervention; the death of capitalism as they know it. But President Bush makes an important point, the cost of the alternative would be too catastrophic to contemplate: "Massive job losses and devastated retirement accounts" and a drying up of loans.

The picture may not be portraits of characters from Grapes of Wrath or John Steinbeck's other novels, but the gravity of America's problem and the potential impact on the rest of the world ought not to be underestimated. The credit default swaps, the murky, seeming amorphous instruments that underpinned the subprime mortgages that American banks so recklessly gave, has morphed from a US$700-billion business at the start of this decade, to a global market worth an estimated US$60 trillion.

So, unsurprisingly, banks in Britain, and elsewhere in the world, have felt the impact of the crisis, and some have had to be shored up by government or have taken refuge in the arms of suitors. Even in Jamaica, institutions have not totally escaped, some facing exposure, though limited, to the Bear Stearns, Merrill Lynch, and Lehman Brothers fallout.

Regulatory reform

However, fixing America's crisis can't stop merely at the bailout. Wall Street's free-wheeling swagger needs a good dose of oversight. Regulatory reform is important.

But critically, as we have argued before, this crisis is as much about domestic policy as a statement of America's shifting position as the dominant economic power and the efficacy of a system that allows a mere handful at the table. In other words, it insists upon the overhaul of the Bretton Woods arrangements, with a constructive place for newly emergent voices from Latin America, Asia and Africa.

It may be difficult to stomach, but it is a challenge that America has to face.

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