When Julius Caesar crossed the Rubicon, he knew he was starting a new political system. As the Bush administration takes over trillion-dollar AIG, it has no idea what it is starting. It does not even know what to do next.

All that Secretary of the Treasury Henry Paulson knew was that if AIG was allowed to slip under the waters, all hell would break loose. There might be something close to panic in the streets.

The Secretary and his co-workers knew that one money market fund had already lost so much money when Lehman Brothers declared bankruptcy that it had to suspend its depositors’ withdrawals. But Lehman is small potatoes compared to AIG, a gigantic insurance-cum-investment corporation.

If it collapsed, many more money market funds would be in danger of being frozen. Americans have deposited over $3.5 trillion in money market funds, and if that money could not be withdrawn, we would be looking at a depositor panic such as that of 1933, when thousands were pounding on bank doors to retrieve their lost life savings. As it is, many are so frightened of losing their money that they are putting it into the safety of government notes paying interest of around two-tenths of a percent.

It was either act or stand aside and let things rip. Paulson, and especially Federal Reserve Board Chairman Ben Bernanke, who is a close student of the subject, know what happened in 1933 when everyone was frozen in place as first Wall Street and then every other street crashed and burned. Faced with only two choices, these Republican businessmen elected to nationalize AIG just as the same men had done a few days before with the government takeover of Fannie Mae and Freddie Mac, the huge home mortgage finance corporations.

From the point of view of AIG’s stockholders, this is not a sweetheart deal. The interest AIG must pay on the $85 million loan it needs to stay afloat is 11.5 percent. Those are almost credit card rates. In addition, the government gets to own 79.9 percent of the stock and gets to fire the old CEO, name the new one and do anything else it wants.

The government now owns AIG for all intents and purposes, although reluctantly. The hope was that private-sector companies would come up with the money, but either they were too scared or they did not have that kind of capital. Everybody has taken such a beating that assembling such large chunks may be impossible at the moment.

The AIG rescue takes care of this week’s crisis, but does not put an end to them. The AIG arrangement was no sooner announced than talk began that Goldman Sachs and Morgan Stanley, the last two big brokerage houses, are next up on the chopping block. Either they will have to sell themselves to somebody or watch their stock sledgehammered to the point of bankruptcy–or so some think.

Goldman and Morgan are not the only candidates for extinction. The names of Wachovia, a big bank and financial wheeler-dealer, and Washington Mutual, the nation’s largest savings and loan association, are on the death list. Fear and suspicion permeate the world of finance and money. Banks are even afraid to lend to each other.

Beyond Wall Street a tide of anger is growing as people see layoffs, swelling unemployment, home foreclosures, students struggling for college loans, retirement savings evaporating on one side and on the other sums too large to calculate seemingly being spent to bail out billionaires. Reports of larcenous CEOs walking away from shipwrecks of their own making with untold millions are setting poorly on many an upset stomach.

The administration, after having plunged the country into a new era of state capitalism, is unable to explain what it is doing to its people. The talking has been left to Paulson, an ex-Goldman Sachs CEO, whose estimated worth is close to three-quarters of a billion; he is unable to communicate with anybody outside of finance and government.

Even if he could talk in language ordinary people could understand, he would have little to say. He is living a day-to-day life of exhaustion, coping with the crises as they zoom in on him. He has no plan of action, only the received market doctrine, which has failed him. Do not ask Henry Paulson how or when this terrible storm is going to abate.

Do not look to the presidential candidates either. John McCain, the newly born re-regulator, has no idea what he is talking about. Barack Obama knows what he is talking about but it does not apply. Discussions about how the rules and regulations must be changed are of little moment. We do not know what there will be left to regulate by this time next year.

For now it is day to day, hour to hour, minute to minute. Hold on tight.