As of this writing, the modified Paulson plan has been voted down by Congress and the Dow has taken the largest one-day plunge in history. All of this could have been avoided as recently, even, as a few weeks ago. It could still be solved, but it’s going to take at least one more upgrade for the Paulson program to get it to work. 

First there was Paulson 1.0: The taxpayers of America give the secretary of the Treasury $0.7 trillion, which he then uses to buy vast swaths of mortgage, auto and school loan paper. Forget ‘czar,’ Paulson becomes some kind of global credit market pharaoh, dispensing diktats by mere decree. “So let it be (under)written, so let it be done.” He’d have been a little like Eisenhower on D-Eve, but without (to my knowledge) the power to actually take human life. 

Maybe that plan was a little too ambitious. 

Then there was Paulson 1.5. The same as above, except more so. The secretary would be forced (like Caesar Augustus) to share his powers with an oversight board. But regarding government power, the expansion was to be expanded. Any company benefiting in any way from the plan would have its top management compensation schedules set by the government. Given the sheer size of the bailout, this would affect a very high proportion of the U.S. financial industry. 

In addition, the government was to be given shares of stock in the company, with no limit set–that means board seats. The hard left shock troops of groups like ACORN would have been put on the government dole, and the left would be free to conduct agitprop and intimidation on the middle class’ dime. Like Lenin, Barney Frank would have seized the “commanding heights” of finance in a single move. Unlike Lenin, he would have done it without firing a single shot. 

Paulson 2.0 cut the Bolshevik stuff out of the legislation. ACORN subsidies? Gone. Voting shares in U.S. companies? Gone. CEO compensation caps? Mostly gone. In consultation mainly with House Republicans and a few “opinion molders” such as yours truly. The size of the expenditure was also cut. Some deregulatory measures were added, such as giving the SEC the authority to suspend the tremendously destructive mark to market accounting mandate. Score one for Kudlow, Forbes, Wesbury and a few lesser “molders” like Bowyer. We harped on it; Paulson listened. 

But Congress didn’t listen. They turned it down and the markets are imploding. Thank you, populism. Thank you, Newt Gingrich. Thank you, talk radio. Thank you, Lou Dobbs. 

Before we all run out to buy shotguns and propane tanks, perhaps we can try a collective upgrade to Paulson 3.0. The fact is, this issue has been mis-framed by most of the press (and the administration) and therefore it has been misunderstood by the people. Freedom didn’t lead us to this crisis–central planning did. We weren’t under-regulated; we were over-regulated. There has not been a single piece of deregulatory legislation passed in the last eight years. But there was a major piece of re-regulatory legislation passed under Bush–the Sarbanes-Oxley Act. By upping the penalties on financial executives largely from civil to criminal sanctions, Sarbox put the whole multithousand page regulation manual on steroids. No more fines, next time handcuffs. 

No wonder nobody wanted to hold politically tainted paper. Owning a mortgage-backed security in this environment is like owning a pointy hat and a black cat in colonial Massachusetts. 

These securities, which the government invented (through Fannie Mae (nyse: FNM - news - people )) and foisted upon the banks (through the Community Reinvestment Act), now has regulatory cooties. Own it and you’ll get sued. Sell it and you’ll get sued. Keep it and the regulators will force you to write it down to panic-level prices–and then you’ll get sued. Try to foreclose and state and local government will refuse to enforce the contract. Try to get private equity investment to keep your balance sheet alive and you find the door barred by 80-year-out-of-date regulations like the Bank Holding Company Act. 

Government did this to us. This plan isn’t a bailout–it’s more like reparations. 

But still, maybe we can improve it. Perhaps the mark to market regulations could be suspended before the taxpayers are forced to move in. Maybe if some of these rules are eliminated, little or no taxpayer dollars will be needed. If Congress doesn’t want to put public dollars into this, it should let private equity put private dollars in. 

It’s a silly throwback to the 1920s, which only allowed bank-holding companies to buy a majority investment in a troubled bank. Back then, all banks were local. Now banking is an international industry. Mutual funds, private individuals, hedge funds, venture capitalists, leprechauns, unicorns…everybody should be allowed to buy bank shares. If everybody is not allowed to, I’m afraid everybody will be forced to. 

Before more coercion, maybe we could try a little more freedom. The plan’s getting there but there’s something missing. Needs a little more liberty bell.

This article originally appeared on Forbes.com.

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