Paulson said this week, "The blueprint is about structure and responsibilities, not the regulations each entity would write." What those regulations actually say, and how competent the regulators are in enforcing them, are obviously critical.

New curbs are needed on mortgage lending; on off-balance-sheet risk; on the opacity of new financial instruments. The blueprint has nothing to offer on any of this. And even if you accept the plan for what it is, it has another big gap. The authority of its prudential regulator is confined to institutions that benefit from "explicit government guarantees" -- meaning deposit-taking banks. But the government's safety net is not confined to firms with explicit guarantees. In emergencies, it deems other institutions (such as Bear Stearns) too important to fail.

Ingenious as markets may be, an exaggerated cycle of credit-driven boom followed by panic-induced bust is neither desirable nor necessary. Better financial regulation can help to attenuate the ups and downs. It is a matter not of more regulation or less, but of making the rules smarter. How to do that is a discussion that has barely even begun. 

First, we must reform the way we educate the next generation of workers to ensure that our nation stays competitive. We should require all students to receive one year of training and education after high school -- be it at a community college, technical school, or a four year university.

Second, we should ensure that all Americans have quality, affordable health care. Helping older workers and employers manage the health costs of early retirees will make it possible for entire sectors of the U.S. economy to get back on their feet.

Third, we must support the development of new, energy-efficient technologies that will make energy less expensive for consumers and businesses, help protect the environment, create millions of green-collar jobs, and make our nation energy independent.

Finally, we must become a nation of savers again with a universal savings plan.

Maybe it is not so mysterious, though, that the Bush administration could simultaneously scold defaulting homeowners for the sin of striving to join the "ownership society" promoted so vigorously by the president until recently, while reversing course to drop all pretense of personal responsibility when a large financial house is at the brink. It seems to be all a question of vision, of who matters in the end in the priorities of an ideology-driven White House.