Too many ornaments on the left’s Christmas tree, with the star on top being Chris Dodd’s preposterous proposal to make sure ACORN gets a cut of the income from each distressed asset sold at a profit even if distressed assets in the aggregate are sold at a loss. They’ve got a little more than 24 hours to pass a bill before the markets in Asia open Monday; Roy Blunt thinks if they don’t have it done by then, there won’t be a deal until late next week. Any problem with that? Read Bill Kristol’s latest at the Standard and have a paper bag handy, as you’ll need it to breathe. Publicly, at least, Fortis denies it’s at risk of going under and claims it has liquidity to spare. Kristol claims two sources who say otherwise and foresees bank runs in the U.S. from the shockwave if it happens — bailout or no bailout. (Roughly half of all Belgian households have accounts with Fortis, according to Reuters.)

We’ve reached the point where even the Journal is sufficiently worried to beg for relief:

No one tried harder than we did to avoid arriving at this pass, but now that we’re here our vote is that this government intervention is justified to defend the system…

The libertarian blogs are full of tut-tutting that the economy has held up surprisingly well, and for a year we’ve been arguing the same thing. But there’s no guarantee this will continue, especially as unemployment climbs and as evidence grows that banking distress is squeezing credit to small and big business alike. Credit spreads over Treasurys are back at agonizing levels, as investors and lenders flee from even plain vanilla risks.

Nobel economics laureate Gary Becker is no alarmist, but this week he wrote on his blog, “I have reluctantly concluded that substantial intervention was justified to avoid a major short-term collapse of the financial system that could push the world economy in a major depression.” Anyone who thinks that capitalism will fare better after a crash should recall that the 1930s didn’t end politically until 1980…

The Paulson idea also seems better than the “insurance” plan for bank assets that House Republicans are now proposing. That idea would still put taxpayers at risk if the assets fall in value, but with little potential upside. Meanwhile, the assets would remain on bank books, making it that much harder for banks to raise private capital and resume normal lending.

The House GOP intervention may still be fortuitous if it focuses on killing the many Democratic ideas that are making the Paulson plan worse.

Indeed, which raises the question of why Dodd et al. are demanding handouts to ACORN when there’s a developing national emergency to deal with. As I’m writing this, Bloomberg is hitting the wires with a report that progress has been made on a deal and that Reid and McConnell are optimistic it’ll be struck tomorrow, with Bob Corker quoted as saying House GOP resistance is “thawing.” Let’s hope. If you follow only one link here, make it this AP history of recent government bailouts in Sweden and Japan explaining why even well-managed recoveries mean multiyear downturns. We’re in for a bad stretch, even if it’s not — knock wood — a catastrophic one.

Update: I’m not much in the mood for blame right now but people are sending this around and it’s as good a post as any to update with. Barney Frank has a star turn, as usual.

Update: Pelosi wants something to look at by tonight. I honestly wonder what the public reaction’s going to be if they stay deadlocked, the market drops 2,000 points on Monday, and people start running on banks. Confidence in government will be even lower than confidence in the markets, which means political destabilization. But what will that look like?

Update: Don’t look now but there’s panic brewing in Britain as well, with a major bank in danger of being nationalized on Monday.