The fall has been greater than U.S. Treasury Secretary Hank Paulson and Fed Chairman Ben Bernanke contemplated, and far greater than the US$700 billion bailout and the additional US$800 billion program to buy up debt that the Federal Reserve announced just before Thanksgiving. The total government commitment to guarantee deposits, inter-bank loans, and to ease credit is about US$8.5 trillion, according to Bloomberg news. A bad day in the U.S. stock market can suck nearly a trillion dollars of wealth out of the U.S. economy, and bad days have been frequent. Approximately one and a half million jobs have been lost since January. Contrast that to normal years, when the U.S. creates at least that many new jobs. Unemployment in the U.S. could exceed 10% next year. This week American automakers are asking for a US$34 billion bailout instead of the US$25 billion request that they couldn't justify last month, and public opinion polls show strong opposition to it.

Traditional American optimism makes us hope that President-elect Obama and all his men and women can put this humpty dumpty economy together again. It will be a daunting task, and former President Clinton's prediction of recovery in fifteen months to two years is overly optimistic. An economy in which consumer spending rose to more than seventy percent of the gross domestic product before the fall cannot recover that fast when consumers have no more money to spend, unemployment is at 10%, and 15% of American households owe more money than their homes are worth.

Treasury Secretary Paulson and Federal Reserve Chairman Bernanke have responded to the crisis in fits and starts. They saved Bear Stearns and CitiBank, and helped other banks, but let Lehman Brothers fail. That set off the near meltdown of the worldwide financial system. Although Paulson has thrown money at banks ever since, he stood by passively as the beneficiaries stated they would use the funds to buy other banks, rather than make more credit available as the bailout was intended to do. To complicate matters further, Paulson has been ideologically allergic to measures that would help distressed homeowners stay in their homes, in effect running away from the ground zero of the mortgage and housing crises.Most economists agree that measures taken so far were necessary to avert a complete meltdown of the financial system. What is disturbing is Paulson's propensity for throwing a great deal of money at emergencies while requiring precious little of the beneficiaries. This kind of handout to the irresponsible scions of private enterprise amounts to public socialism for private benefit. Success would bring profit to those who caused the disaster, but the public pays for both failure and success.

It does not have to be that way. If American taxpayers take all the risks by paying for these bailouts, success should give them a far larger share of the benefits than Paulson is securing from the institutions he helps. Fairness demands that Americans have a sovereign wealth fund (SWF), and we need it now. Before screaming that this would be rampant socialism, let's try to envisage a more enlightened capitalism in this economy, and compare that to the sputtering response to the crisis of 2008.

National security, sound economic practice, and the future of the U.S. as a nation of confident shareholders demand our sovereign investment in the shares of the companies that government would save. Consider the national security imperative in simplified terms. China's SWF, created in September 2007 to manage some US$200 billion of its foreign currency reserves, is far from the largest, but that much money would have been sufficient to buy almost double the outstanding common shares of GM, Ford, Citibank, Goldman Sachs, Morgan Stanley, and Merrill Lynch at the market price on November 25, when Fed Chairman Bernanke announced his US$800 billion plan to buy up debt.

This new US$800 billion rescue plan includes the first efforts to finance consumer debt. But the new loans, bond purchases and the temporary suspension of foreclosures by Fannie Mae and Freddie Mac come late and are still too little.

The history of the late 1980s Savings and Loan (S&L) Crisis should have guided the government's response to the current mortgage debacle. When a bank forecloses and takes possession of a property, losses will easily exceed fifty percent under the best of circumstances. In the face of that reality, Citibank reportedly has already marked down its most toxic mortgage-backed paper to twenty one cents per dollar of those securities. When the S&Ls collapsed, the Resolution Trust Corporation sold packages of defaulted loans for less than fifteen cents on the dollar, and these sliced and diced mortgages will be much more difficult to unravel.It would be far more cost effective to keep people in homes, even if that requires modification of mortgages to cut their interest rates by half for the next ten years. The homeowner would have hope of eventual housing price recovery, and the note-holder would receive a substantially greater return than by foreclosure.

The ultimate costs of rescuing the U.S. economy are beyond accurate prediction, but don't be surprised to see recovery costing the American taxpayer well in excess of five trillion dollars. With corporate bonds subject to a worldwide US$60-70 trillion in credit default swap bets on whether they will default, bailouts could add up to considerably more than anyone wants to contemplate.

The latest US$20 billion injection into Citibank is essential, like many rescues yet to come. But if citizens are going to pony up sixty percent and more of the market value of a company in one fell swoop, they should get a substantial share interest, including seats on the Board of Directors. These directors would not run the company, but they would be tasked with the job that government regulators should have been doing all along -- insuring that the nation's shareholders are protected from the irresponsible practices and outlandish leverage that brought us to this juncture. Howls of "socialism" betray name-calling instead of understanding. The real socialism would be the bailout practice of pouring public money into private hands on far too generous terms.

By making all Americans real shareholders instead of guarantors, loan brokers, and charity givers in this bailout process, we would be approaching a more enlightened capitalism even though the common shares of rescued companies are held in government name. The ultimate revenue and tax consequences of a profit oriented sovereign wealth share-based rescue would make everybody a capitalist, with "shares" related to the individual tax burdens paid and reduced if the common enterprise is successful.

Goldsmith is a former director of the American Institute in Taiwan's Kaohsiung Office, and author of "Jade Phoenix," a novel of 1970s Taiwan.