The more the Federal Reserve does to avert financial contagion, the clearer it becomes that the Fed alone cannot solve the problems in the financial system. To many Americans, it’s now obvious that taxpayers will have to step in. Less obvious is that if the US doesn’t stabilise the markets, foreign governments increasingly will.

Yet the Bush administration is encouraging more investments, no questions asked. Administration officials have tried — and failed to date — to get various government investors to agree even to voluntary transparency standards. This week several Wall Street firms will release their latest results, and they will probably be ugly. The drive to raise capital will very likely get more intense. So the Bush administration should work with Congress now to prepare the taxpayer-financed bailout that seems all but inevitable. If Washington stopped acting as if it had no role to play, it might seem less desperate to foreign investors, and Bush might have another chance to persuade them to provide more transparency.

The administration and federal regulators are largely to blame for getting the country in this mess by turning a blind eye to reckless lending and investing. They must not compound the error by turning a blind eye to what may be waiting just down the road. -The New York Times