The numbers cited here for bank rescue costs are staggering -- way beyond our imagination. Keep in mind that we are talking trillions, not billions. You might want to etch these numbers in your memory to say that you have lived through perhaps the greatest financial crisis of our time.

• The U.S. government and the Federal Reserve have spent, lent, or committed $12.8 trillion to bank rescue, which amounts to about the value of everything produced in this country as of March 31.
• EU governments have approved $5.3 trillion of aid, more than the annual GDP of Germany.
• The UK pledged $1.1 trillion to restore confidence in its lenders, the most of any EU member.
• The top three EU states providing capital injections were the UK with $781.2 billion, Denmark with $593.9 billion and Germany with $554.2 billion.

Investors should not read too much into the Dow's nearly 400-point drop Tuesday. What they should concentrate on, in the view of a pair of economists, is the mechanism the U.S. Treasury uses to price toxic assets.

The above is the most important 'unknown' in the U.S. Treasury's financial stability plan, so says economist David H. Wang -- how toxic assets that are clogging banks' balancing sheets and restricting credit -- will be priced.

"Will the United States government set-up a clearinghouse? Or will they design some type of open outcry, or managed open outcry? These are the key unknowns," Wang said. "Treasury Secretary Geithner and his staff cannot rush this decision, but on the other hand they cannot take two quarters to developed it. They have to announce the structure of the pricing program within a couple of weeks. I cannot underscore enough the importance of this pricing methodology. It will be the biggest factor in whether the credit system recovers, or something much worse occurs."

Every once in awhile during a crisis or an event, you run across a quote or an observation that sort of summarizes events on the ground, in a nutshell.

New York Times (NYSE: NYT) business journalist Floyd Norris articulated one such observation during a roundtable discussion with other Times journalists on "The Charlie Rose Show" on PBS Monday night.

Regarding the bank bailout plan, Norris said, "This is a case where justice and success don't come together."

You have to appreciate the cleverness of this era's financial humor. (Note that I said, appreciate the cleverness, not love, or enjoy. That's because, depending on your perspective, the humor is either on-the-mark, or not that funny. But that is part of the subjective nature of humor.)

One joke making the rounds:

Question: What's the capital of Iceland?
Answer: $25.

Another: In the old days, banks lent money to people. These days, people lend money to banks.

New York Times (NYSE: NYT) columnist and Nobel Prize-winning economist Paul Krugman discusses bank capital and lending in his most recent column, and argues that the apparent likely Obama administration fix for the banking sector -- a combination of U.S. government purchase of toxic assets and guarantees against losses on other assets, each on terms favorable to the banks -- represents a lousy deal for the U.S. taxpayer, who'll end up "footing the bill for rescuing the banks."

It's a Washington, D.C. adage -- one that can help investors understand the public policy process -- and House Financial Services Chairman U.S. Rep. Barney Frank, D-Massachusetts, among others, have said it a dozen times, if not more:

"Congress doesn't get credit for not doing something or for avoiding something," Frank has said.

Case in point: TARP I, the initial $350 billion allocation in Troubled Asset Relief Program funds. The initial allocation has been widely criticized as ill-conceived. Some of the money has apparently enabled certain banks to approve large bonuses, allowed others to complete acquisitions or position themselves for the same, or pay-down debt, while not resulting in what Congress intended the allocation to accomplish -- increase lending to businesses and consumers.

With public indignation and Congressional outcries building concerning large Wall Street bonuses while the U.S. taxpayer bails out the same industry that contributed to the financial crisis, efforts to limit or eliminate excessive compensation may hinge on whether the Obama administration wants to use political capital to do it.

The public attention-grabbing incidents are certainly there to keep the U.S. Congress focused on the issue: Wall Street allocating its sixth-highest level of bonuses during the investment banking sector's worst year since the Great Depression. Former Merrill Lynch CEO John Thain's decision, since reversed, to use $1.22 million in company money to redecorate his office, is one example. Another is Robert Rubin receiving more than $100 million in compensation from Citigroup (NYSE: C), a bank that's receiving hundreds of billions of dollars in government guarantees and other, direct financial assistance.

Outgoing U.S. Treasury Secretary Henry Paulson stated goal was to have banks "deploy not hoard" TARP money as a part of process to loosen constrained credit markets.

In advocating such, the outgoing Bush administration hoped that banks would work with homeowners at risk of losing their homes to foreclosure.

Some banks have worked with struggling homeowners, offering alternate payment plans, loan forbearances, or even lowering the interest rate to help get these mortgages back in the non-delinquent category. Still, the practice has by no means been universal.

Many banks have not participated in mortgage modifications -- even those banks that received TARP funds. For example, a Palm Beach conference sponsored by Sandler, O'Neill & Partners revealed how many banks are using their TARP money, The New York Times reported.

The U.S. Treasury, U.S. Federal Reserve, FDIC's joint decision Friday to inject $20 billion into the Bank of America (NYSE: BAC) and guarantee $118 billion in assets provides another case study. Bank of America's shares fell 80 cents to $7.52 in Friday afternoon trading.

[ Earlier, my BloggingStocks colleague Peter Cohan provided an analysis of the bail-out's cost to taxpayers. ]

Economists and other public policy wonks love the theoretical and they love 'taking the other side' in arguments.

Hey, they can't help it: it's the stuff they were trained to do - - the stuff they love. And, after all, it's frequently a major source of their income.

And my economist and policy wonk colleagues and friends are no different.

Now, on the surface, it looks like yet-another taxpayer bailout of bad decisions by bankers, mortgage lenders, and borrowers. In other words, another "profits - - the bankers win, losses - - the U.S. taxpayer foots the bill." Further, because it occurs on the heels of the Bank of America's buy-out of Merrill Lynch, it looks like, in some sense, U.S. taxpayers are subsidizing a financial institution merger.

Yet another milestone has been reached in the ever-evolving global economy: China has passed Japan to become the largest foreign owner of U.S. Treasuries, the U.S. Treasury Department announced Tuesday.

China added $43.6 billion in U.S. Treasuries in September to about $585 billion in U.S. government debt, ahead of Japan's $573 billion.

Economist David H. Wang says the increased demand for U.S. Treasuries reflects both a global trend and an effort on China's part to increase high-rated bond holdings.

"In general, of course, during the financial crisis we've seen a global flight-to-safety by institutional investors, which has increased demand for U.S. government bonds," Wang said. "Also, China has made it known that it will be adding to existing U.S. bond positions, and the September data is further confirmation of this investment stance."

That global demand, led by China, has enabled the United States to have perhaps the most unique of all possible financing circumstances: moderate interest rates to finance its debt despite rapidly increasing borrowing to pay for the U.S. bank rescue and related financial stabilization programs, Wang said. For example, despite record government borrowing, the yield on the 10-year U.S. Treasury note is lower today, at 3.68%, than it was in August, 3.88%.

It's one of those statistics, or 'numbers' as they are called in Wall Street circles, that's likely to be etched in the memory of those who were around during the United States' difficult decade - - its decade of descent.

The U.S. Government's budget deficit soared to a record $237.2 billion in one month -- October -- as the federal government invested more than $136 billion in bank and related rescue programs, the U.S. Treasury Department announced.

Bank rescue: one-time charges (hopefully)

Of course, the federal government isn't expected to borrow and invest an additional $136 billion every month -- a large amount of borrowing was expected at the start of the U.S. Government's effort to end the financial crisis -- but this past October's total is four times the size of the $56.8 billion in borrowing required in October 2007.

In July, the Bush Administration estimated that this year's budget deficit, fiscal 2009, would total $482 billion, but that projection was formulated before Congress passed the $700 billion rescue program on October 3.

Bonuses for a U.S. Government-rescued Wall Street should take on a 'slightly' leaner tone, according to a sampling of U.S. taxpayers by Bloomberg News. The taxpayers' judgment regarding how large the bonuses should be? Zip. Nothing. Nada. Niet.

Wall Street, which created many of the Frankenstein-like financial instruments that either distorted and/or hid loan risk, and also in some cases encouraged the issuing of problematic mortgage forms, is not justified in paying bonuses, and certainly should not award them following the government's massive $700 billion bail-out of the industry, a sampling of U.S. taxpayers indicated.

One U.S. resident, Ken Karlson, a 61-year-old Vietnam War veteran who lives in Illinois told Bloomberg News, "I may not understand everything, but I do understand common sense." He added, "the bailout money should not have been given to them in the first place."

Economist Richard Felson told BloggingStocks Tuesday acrimony from U.S. citizens is not outlandish or unreasonable given the facts to-date of the current financial crisis.

Talk about a large amount of funding in a quarter.

The U.S. Treasury Department, weighed down by unprecedented obligations for the bank rescue and a slowing economy, is expected to borrow a record $550 billion this quarter, compared to the pre-financial crisis estimate of $142 billion, the department announced.

Further, the $550 billion bond issuance follows a record $530 billion in borrowing in Q4 of fiscal 2008, which ended September 30.

In addition to the bank rescue and related programs, the slowing U.S. economy has also increased Treasury borrowing by reducing federal receipts and increasing outlays.

The U.S. Government closed fiscal 2008 with a $407 billion deficit, according to the Congressional Budget Office (pdf). The CBO projects a $438 billion deficit for fiscal year 2009, but economist Richard Felson said the total is likely to approach $1 trillion if the bank recapitalization and toxic asset repurchases proceed along outlined timetables.

"These are staggering sums of debt and it's hard to envision the dollar holding up long-term, given such borrowing," Felson said.

Want to sum up the United States' fiscal situation in a word?

Warren Buffett did, or did so in 16 words to be exact, in a chat with The New York Times: "I'm paying the lowest tax rate that I've ever paid in my life," Buffet said. "Now, that's crazy."

Further, Buffett, the world's richest person as ranked by Forbes Magazine with wealth totaling $62 billion, also said the U.S. Government should increase taxes on the wealthy to help pay for the recently-passed bank rescue, which is designed to end the financial crisis.

Buffett's stance demonstrates that there is at least one person of high income and/or wealth (and probably many more) who believe upper-income groups should be paying more in federal taxes each year.

2001 tax cut generated large U.S. budget deficits

Buffett's view is also in stark contrast to the Bush Administration's philosophy and policy, which has prevailed for the decade and which argues that lower tax rates on upper-income groups will not only generate higher GDP growth, but also result in revenues high enough to close the federal budget deficit. It hasn't happened, said economist David H. Wang.

Is the dollar's status as the world's reserve currency coming to an end?

It could be, if present trends driven by corrective measures taken to stem the global financial crisis continue, in the view of one monetary official.

European Central Bank council member Ewald Nowotny believes a 'tri-polar' global reserve currency system is developing among Asia, Europe and the United States.

"What I see is a system where we have more centers of gravity," Nowotny said Monday in an interview with Austrian state broadcaster ORF-TV, Bloomberg News reported Monday. "I see for the future a tri-polar development, and I don't think that there will be fixed exchange rates between these poles."

The dollar has served as the world's reserve currency for more than 30 years. A reserve currency is one which financial institutions -- and nations, for that matter -- seek to own during times of financial crisis, stress, or uncertainty. The reserve currency attracts investors in a phenomenon called a 'flight to safety.'

The euro, the currency of the euro zone, this decade has challenged the dollar's reserve currency status, following its introduction into global financial markets in 1999. (Physical euro banknotes and coins began to circulate on January 1, 2002.) A series of U.S. fiscal policy and trade policy errors, among other factors, has caused the dollar to weaken against the euro from about 82 cents per euro in 2001 to the present $1.3317 per euro.

Washington Post Business Columnist Steven Pearlstein does not 'hold it all in,' as they say, regarding who he thinks is most to blame for the financial crisis.

Pearlstein cites the ineptitude of Wall Street and the nation's financial regulators. The crisis would have occurred whether Lehman Brothers was saved or not, because bad debt had overwhelmed the global financial system. A government intervention was inevitable, essential, and an act of leadership, in Pearlstein's view.

Conversely, Wall Street's top executives have shown little leadership, if any, he said. Their silence and invisibility throughout the crisis "attests to their moral and political bankruptcy," Pearlstein said, a perfect match for the financial bankruptcy they caused for investors, creditors, and customers.

Further, Pearlstein is particularly angered by Wall Street's top executives unwillingness to commit to a plan to enable borrowers to refinance mortgages into government guaranteed mortgages set at 85% of current market value of the property, and at the executives' utter lack of comment before the cameras, particularly regarding credit lines to businesses.

Political & Economic Analysis: Columnist Pearlstein clearly lays the blame for the financial crisis at the feet of Wall Street's top officials. Still, the mortgage process -- and the failure of a substantial portion of the subprime/Alt-A mortgage market -- involved many players: bank executives/lenders, mortgage brokers, appraisers, securitization specialists, ratings agencies, and borrowers.