A reassuring new story line is emanating from our leaders. I heard Representative Barney Frank, chair of the House Banking Committee, explain it. Then I read the same line in a Washington Post news story. That tells me people in high places are selling it. Dynamic capitalism, they explain, invents ways to create greater wealth, but sometimes it goes a little too far. Then government has to step in to correct things. This need typically occurs every generation or so, all in a day's work. The Obama administration is proposing "sweeping" new regulatory laws so that capitalism can continue its good works.

The story makes disturbing current events sound practically normal. But what are the storytellers leaving out? They aren't saying that this financial catastrophe was not merely an inevitable development of history but a man-made disaster. Greedheads on Wall Street did their part, but so did Washington. The reason we need new rules is that a generation of Democrats and Republicans systematically repealed or gutted the old ones--the regulatory controls enacted eighty years ago to remedy the last breakdown of capitalism (better known as the Great Depression).

The White House executed a nifty two-step this week to re-educate the public and deflect anger. On Tuesday Treasury Secretary Timothy Geithner relaunched the massive bailout of banking and finance. Knowing how unpopular this is with the people at large, Geithner followed on Thursday with his "sweeping" plans to re-regulate the bankers and financiers. Whenever official plans are called "sweeping," it indicates that they really, really mean it this time.

Most Americans are not financial experts. It's very difficult, nearly impossible, for normal mortals to sort through the dense policy talk and conflicting opinions to figure out if the rhetoric of reform is real. Confusion is widespread in the land. Most Americans want to believe this president is leading us out of the swamp, but how can they know? I say, trust your gut feelings. They are as reliable as the learned experts.

Many Americans want to believe because they think that returning to "normal" means their decimated 401(k) accounts might somehow recover the 30-40 percent that disappeared during the past year. If it takes monster bank bailouts to restore stock-market prices, let's have bailouts. Good luck with that. The Dow has regained 21 percent in two weeks of rallies, but I remind friends that steep, short bursts in the stock market do not foretell the future of the economy. Banks may be relieved of their losses without changing the general economic outlook. After the crash of 1929, there were occasional stock rallies, followed by fierce bears. It took twenty-five years (until 1954) for the Dow to regain its old peak. Another way to assess the Obama plan for reform is ask: who likes it? The verdict was swift and sure after Geithner's twin announcements. Wall Street likes it. The blueprint for regulatory reforms was applauded by the Securities Industry and Financial Markets Association; the American Insurance Association; and the Private Equity Council, the trade group for the major private funds that will get public money and backup insurance to buy the banking system's rotten assets. This could be born-again patriotism. Or it could be the animal appetites of financiers smelling gorgeous opportunity for returns.

This may be one of those moments where people can find some guidance from their moral convictions. They do not need to know all the details to ask simple questions. Does the outline of what's happening to rescue major financial institutions seem morally wrong? Or is it justified by the larger necessities of the national predicament? Is the government insufficiently tough in demanding reciprocal commitments from the beneficiaries? Should Washington pursue larger structural changes in the banking system?

Trying to imagine alternatives to the bankers-first bailouts is a good place to start. What follows are suggestions I produced at the request of young people organizing demonstrations around the country for April 11. They call themselves A New Way Forward. I hope they light lots of bonfires.

This rough outline leaves out lots of particular regulatory issues, but the core goal of reform is to create a banking and financial system that serves the society and the economy, not the other way around. Everything being done to rescue and restore the old order gets in the way of creating something truly new and valuable for the future. Those of us throwing logs in the path of the bailouts are dismissed as naysayers or worse, but the financial titans are trying to foreclose just solutions by stampeding Congress and the president to adopt ill-considered ideas.

If Wall Street gets its way, the "reforms" may further consolidate power and ratify a corporate state--a grotesque hybrid that combines the worst aspects of socialism and capitalism. The reform ideas announced by Geithner would plant the seeds by creating a "systemic risk" regulator, presumably the Federal Reserve, to oversee the largest, most politically adept banks and financial firms that qualify as "too big to fail." Capitalism, with its inherent tendency toward monopoly, would have the means to monopolize democracy (see my recent Washington Post article.)

My new book, Come Home, America, asks people to enunciate their versions of "patriotic realism." That is the essence of an alternative vision: deconcentrate power, liberate people and smaller enterprises, workers and middle managers and investors, to help shape the country's future from many different perspectives. This is how democracy was supposed to work. It can again.

Some points I recommend people consider:

1. Euthanasia for insolvent banks. Transferring their losses to the public will not restore the trillions in capital the bankers helped destroy. It would merely relieve the banks, their creditors and shareholders of the pain. Government must take control of the system to supervise a just unwinding of the mess--whether we call it nationalization or something else. Handing out money and leaving bankers in control of how it's spent is nutty and morally wrong. People everywhere understand this. Only Washington seems oblivious to the irrationality of what it is attempting.

2. The Federal Reserve must be democratized and effectively stripped of its peculiar antidemocratic status as an unaccountable island of power within the government. A new federal agency--accountable to Congress and the president--can be refashioned from the working parts of the Fed. Call it a central bank or something else, but its governing power must not rest with heavyweight bankers on the board of directors at the twelve regional banks. (To understand why, consider that the New York Federal Reserve Bank was headed until recently by Geithner.)

3. The reformed Fed would be confined to conducting monetary policy and stripped of its regulatory functions. A different section of the Treasury or a new free-standing regulatory agency can assume responsibility for regulation and be armed with strong antitrust laws and other rules to ensure that "too big to fail" institutions are redefined as "too big to save."

4. The federal law against usury can be restored to halt predatory lending. Persistent violators would not be fined with trivial penalties, as they are now, but stripped of their government protections and subsidies--that is, doomed.

5. A new banking system--smaller and more diverse and responsible to the public interest--can fill the hole left by the demise of major banks like Citigroup. Vast public resources should be devoted to creating this system, not to saving the mastodons. Public banks (like the North Dakota State Bank) and nonprofit savings and lending cooperatives can also serve as an important cross-check on private commercial banking--a competitive model that offers credit on nonusurious terms and keeps the big boys honest.

6. Once the Federal Reserve is domesticated in a democratic fashion, then it can be reformed to assume broad supervision of the nonbank financial firms in the "shadow banking system"--hedge funds, private equity firms, pension funds, mutual funds, insurance companies. (For more on this, see my recent Nation article, "Fixing the Fed.")

7. Our first political challenge is to disturb business as usual in Washington and prevent Congress from taking hasty action to adopt Wall Street's "reform" agenda. Congress is rattled by the exploding popular anger and listening nervously. The people need to speak louder--loud enough for the president to hear.