As the financial system sinks further into fiasco and everyone compiles their blacklists of who they believe is to blame, it has become only more difficult to differentiate special interest from needed assistance.

Though feelings of betrayal are founded and skepticism towards the rescue package being formed in Congress is justified, we cannot let the desire to “make those responsible pay” get in the way of paving a smoother future for the rest of us.

First, we should proceed with passing a financial system rescue package in Congress. Yes, it is flawed. Yes, it is a lot of money. And yes, we could spend $700 billion on a number of very worthy governmental programs.

But the facts show that allowing the financial system to fail will effect everyone, not only the people and institutions that got us to this point. No rescue package formed by Congress will be perfect. As it now stands, the package doesn’t address some important criticisms made by a number of financial economists who know what they’re talking about. With the time crunch in mind, these concerns should be addressed.

Though $700 billion is an astounding amount of money, much of that will be made back once the treasury sells the assets it will buy with the money. Moreover, the sum is dwarfed by the potential cost of tax receipts were the economy allowed to further tank.

Second, it is critical that we understand how this mess was made. Though it’s popular to point vaguely to the repeal of the Glass-Steagall Act as the initiation of today’s financial crisis, these claims are off mark. Passed in 1933 in reaction to the collapse of the banking system, the Act disallowed banks to participate in both commercial and investment banking, a combination that contributed to the banking downfall of the ’30s.

The Glass-Steagall Acts regulations were appropriate for the challenges of its time, but its repeal isn’t the cause of today’s crisis. In fact, the largest financial titans that have recently gone under — Bear Stearns and Lehman Brothers — dealt only in traditionally “safe” investment banking.

Chief fault, rather, lies with the Bush administration and its blind insistence on a regulation-free market, wherein the financial system was allowed to run amok with negligent lending policies.

I acknowledge that there is a tendency to blame the Bush administration for everything wrong under the sun, but in this case, the charge is accurate. The groundwork for the crisis was first laid by the Clinton administration, which made a commendable push to increase home ownership, especially among poor and middle-class households.

However, this sensible effort for increased home ownership indirectly encouraged chancier mortgage lending policies to individuals who typically wouldn’t have been lent to.

The financial deregulation enacted by the Commodity Futures Modernization Act of 2000 made it possible for financial institutions to take advantage of this weak spot in the market. Championed by Phil Gramm — who was also the main opponent of the Glass-Steagall Act and now serves as John McCain’s economic advisor — the Act ceased the regulation of credit default swaps, which lead directly to the mortgage-backed securities debacle.

The recipe for disaster was finalized by the Bush administration. Despite all the warnings of the anemic housing market, Bush did nothing. Rather, trusting the magical invisible hand of the market, the administration only provided indiscriminate support of even the most risky investments

The crisis is a resounding example of the imperfection of a radical free-market ideology. It demonstrates that regulation of the financial system is badly needed while reaffirming the obsolescence of the economic policy proposed by McCain and exemplified by his economic advisor, Gramm.

It’s time that we accept that the fundamentals of the economy aren’t strong and that lawmakers stop treating “regulation” like it’s Lenin’s middle name.

If not, well, call Ma Joad and fire up the jalopy.

Reach columnist Sarah Gaither opinion@dailyuw.com.