Will the Rescue Package Protect Your Savings?

My apologies to all those of you who have written to me during the last week, desperately wanting to know if your insurance, life savings, and even your bank accounts were safe. I have simply been unable to respond to you all individually. I have been deluged. But your concerns have driven what I have written, and they will continue to do so.

If Treasury Secretary Henry Paulson, the Bush administration, and responsible members of Congress succeed in enacting this comprehensive new rescue package in short order, the good news is: Yes, you should be safe.

That is not the same as saying values will rise, the economy will prosper, and happy days will be here again. But it is very, very different from the dangers that we faced at midweek.

As I was flooded with anxious emails, what struck me was that so many of you were not asking typical financial questions about, say, stock or bond prices or mutual funds.

You were asking whether the system itself was about to collapse. Whether your life savings were even safe.

I've had widows in their 80s panicked about the AIG annuity on which they live.

One thing that helped keep me calm was, paradoxically, the knowledge that things were so bad that the government would simply have to step in.

What has happened this month has been a gigantic run on the bank. It could have actually ended up worse than 1932. It didn't stop until Mr. Paulson, like Jimmy Stewart in "It's a Wonderful Life," jumped on the table with a fistful of dollars and promised everyone they could have their money back if they needed. There are plenty of details still to be worked out, but simply the news that the government is ready to act should stop the deepest panic.

There is still, in some parts of the media, a lot of misinformation about this rescue package, what it means, and why it is necessary to protect your life savings.

So consider this analogy.

Chemical companies are under strict government regulations about what kinds of toxic waste they can produce, where they can store it, and how they can handle it and dispose of it. But during the past five or even 10 years, financial companies have been allowed to create a vast amount of financial toxic waste without much, if any, oversight at all. There were few rules on transporting, handling, or storing it. The labeling was inadequate at best. No one had any idea of how to dispose of it, either. It was the other guy's problem.

This is how all this stuff ended up in your local bank, money market manager, or pension fund.

The government is now proposing to create a giant fund to round this stuff up and dispose of it safely. It may cost $700 billion or more up front. But it will probably end up costing the taxpayer a lot less than that in the end. The real disaster was allowing this stuff to happen in the first place.

As for the alternative? If I thought this plan were going to be abandoned, and the government was going to let "the market" sort it all out, as some people seem to want, I'd be wondering if we were going to be looking next at Dow 3600.

Write to Brett Arends at brett.arends@wsj.com