It took six years to clean up that mess. The total cost to taxpayers: about US$125 billion.

Economist Rob Shapiro, of NDN, a think tank formerly known as the New Democratic Network, said that so far the Fed is “putting as many fingers as it can in the dike” without stemming the flood. He said the government should consider direct government loans to homeowners facing foreclosure.

“There are a range of proposals out there. The focus of the administration and Congress on Wall Street to the exclusion of homeowners is very economically and politically myopic,” said Shapiro, an economic adviser in the administration of former President Bill Clinton.

Republican presidential candidate John McCain has proposed a US$300 billion program for the government to help financially troubled homeowners stay in their homes by taking over their mortgages and renegotiating the terms, which is authorized by the US$700 billion package signed last Friday by President George W. Bush.

While that would be expensive, McCain said, “until we stabilize home values in America, we are never going to start turning around and creating jobs and fixing our economy.” Critics of the McCain plan complained that many of the mortgages involved have been repackaged into complex investments that are now nearly impossible to value, and the government would be hard-pressed to unravel and buy them individually.

Democrat Barack Obama has recommended that the administration move quickly to “use the authority they already have to purchase troubled assets, including mortgages.”

World Bank President Robert Zoellick suggests greater coordination with other major economies in an economically interconnected world. For starters, he says, the Group of Seven club should be disbanded and reformed in a larger grouping. In addition to the G7 countries — the United States, Japan, Germany, Britain, France, Italy and Canada — membership might include Brazil, China, India, Mexico, Russia, Saudi Arabia and South Africa, Zoellick suggests.

Asked what tools the government has left, White House press secretary Dana Perino said, “They have a whole range of new tools from ... all sorts of technical terms that I do not know. But they’re working very hard. And Neel Kashkari will be in charge of that. He’s setting up shop and trying to hire as many people as possible.”

Kashkari is the interim head of the program that will oversee the US$700 billion bailout.

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