This article originally appeared on CNBC.com.

I just got off the phone with Ed Lazear (Chairman of the President's Council of Economic Advisors), and he made a good case for the severity of the crisis, especially negative interest rate on t-bills. It got bad last week. The sun turned to sackcloth, moon ran blood red, burning hailstone, etc....crazy stuff. Something had to be done.

The problem is that they are just beginning to understand what a few of us (including Larry Kudlow and Steve Forbes) have seen all along:

Over-regulation brought us to this crisis, not under-regulation. If we get the diagnosis wrong, then the prescription will be wrong too.

Think of the analogy of a 'bail out': someone knocks a hole in a boat and the water rushes in. The crew bails water out of the boat to keep it from sinking. If things are really bad, another boat comes and helps. This analogy points to the real problem: the hole! If you patch the hole early, no bailing is needed. If you patch it very late, the whole ship needs to go into dry dock. But the bailing out only makes sense in the context of patching the original problem. The worst thing to do would be to allow the ship to sink to make some kind of populist political point. No, revise that:

The worst thing to do would be to take the left's view and say "too much water in the boat, let's knock more holes into it so the water can get out."

That's what more regs would mean. Place salary ceilings on "every company that benefits in any way whatsoever from the bailout" as Barney Frank said today on CNBC, and you'll get a talent exodus. Give judges the power to obviate existing mortgage contracts with investors around the world - the dollar will plunge. Every one of those proposals is another hole in the boat. Continued...