It's not every day that the stock market plunges 4.71% on the S&P 500, as it did today, but government responses uniformly tend towards calming words.  This collection of headlines from late October, 1929 makes my point -- we tend to be too optimistic in our assessments of future events.  We shouldn't shy away from the difficulties we face. 

My concern is not the short-run economic or market downturn.  We're getting through that fairly well.  My concern is that when the bills come due for these bailouts -- say at least hundreds of billions or just over a trillion dollars -- we Boomers won't shoulder our share of the load, and our children will pay them.

"Q.  ...explain to the American people how did we get here.

<PAULSON>: OK.

I would say, first of all, we have excesses, and excesses that have built up for a long period of time, number one.

Number two, we have an archaic financial regulatory structure that came in place a long time ago, after the Depression. It really needs to be rebuilt.

And then there are certain things, like, for instance, Fannie and Freddie. The roots of that -- there what we're doing is really living up to our responsibilities which were rooted in congressional charters that go back decades and then have been perpetuated by Washington.

But, again, what we're focused on right now I think is the future. And the future is stability, orderliness in our financial markets and working through this period, and that's what we're doing. QUESTION: And specifically a future with what kind of regulation?

<PAULSON>: Well, I think there's got to be a balance between regulation and market discipline.

<PAULSON>: You can't rely on one to solve the problem.

But it's going to have to be streamlined and more effective regulation. And there's major changes that we need.

And we also need major authorities to wind down financial institutions that aren't banks -- aren't depositing -- you know, aren't federal institutions with deposit insurance. We need resolutions and authorities to let us deal with situations like Lehman Brothers.

QUESTION: How concerned are you about commercial banks?

And what reassurance can you offer the American people, who may be concerned about (inaudible) checking account?

<PAULSON>: Well, I've got to say our banking system is a safe and a sound one. And since the days when we've had federal deposit insurance in place, we haven't had a depositor who's got less than $100,000 in their account lose a penny.

So the American people can be very, confident about their accounts in our banking system."

 Mr. Paulson didn't shy away from the difficulties we face, but neither did he let fears run rampant.  He meant it when he said he was proud of the way stronger market participants stepped up to stop the bleeding.  Bank of America bought Merrill Lynch, and Goldman Sachs and J.P.Morgan are working out a bridge loan for AIG, the insurance giant that's teetering because of overinvestment in mortgage backed securities. 

Last March, Mr. Paulson convinced Fed Chair Ben Bernanke to cross a line when we bailed out Bear Stearns.  Maybe that will cost $30 b.  The Fannie Mae and Freddie Mac bailouts are difficult to cost out, but it will be at least $200 b. or $300 b. and maybe more.  Last weekend, Mr. Paulson drew the line at putting taxpayer money into Lehman Brothers or AIG. Finally, there is some shared sacrifice.  Now lets be willing to cut federal spending and to raise federal taxes enough in the next few  years to keep from passing these burdens on to our children.