Those wicked free marketeers in the Bush administration! Paul Krugman (Oh, I forgot, Nobel Laureate Paul Krugman) has spotted the trouble: the Bushies are refusing to use the power they have seized in the markets because they still are beholden to laissez-faire:

What’s happening, I suspect, is that the Bush administration’s anti-government ideology still stands in the way of effective action. Events have forced Mr. Paulson into a partial nationalization of the financial system — but he refuses to use the power that comes with ownership.

Just what is the problem, according to the Good Doctor? It seems that the banks, after having accepted the bailouts, are refusing to lend the money:

…U.S. policy makers are still balking when it comes to doing what’s necessary to contain the crisis.

It was good news when Mr. Paulson finally agreed to funnel capital into the banking system in return for partial ownership. But last week Joe Nocera of The Times pointed out a key weakness in the U.S. Treasury’s bank rescue plan: it contains no safeguards against the possibility that banks will simply sit on the money. “Unlike the British government, which is mandating lending requirements in return for capital injections, our government seems afraid to do anything except plead.” And sure enough, the banks seem to be hoarding the cash.

Wait! There’s more!

There’s also bizarre stuff going on with regard to the mortgage market. I thought that the whole point of the federal takeover of Fannie Mae and Freddie Mac, the lending agencies, was to remove fears about their solvency and thereby lower mortgage rates. But top officials have made a point of denying that Fannie and Freddie debt is backed by the “full faith and credit” of the U.S. government — and as a result, markets are still treating the agencies’ debt as a risky asset, driving mortgage rates up at a time when they should be going down.

Hoodathunkit?!? All it takes to end the present crisis is for the government to use its authority and order prosperity to happen! And it has to be true; Paul Krugman has said it, and Krugman is a Nobel Laureate!