One truism of dealmaking is, if you make a bet and you’re wrong, you get punished. However, it seems that the powers that be have decided to put subprime wagers in a category all their own, as markets threatened to seize up for the foreseeable future in one of the scariest financial debacles witnessed since the Great Depression. Here, the full explainer on why the great and the good may wipe as much as hundreds of billions of losses off banks’ balance sheets, in exchange for, well, nothing, really. Just the tacit promise that banks and capital markets will make an attempt to get back to business. But is this a risk that everyone (taxpayers and banks alike) are willing to take?

The federal government is working on a sweeping series of programs that would represent perhaps the biggest intervention in financial markets since the 1930s, embracing the need for a comprehensive approach to the financial crisis after a series of ad hoc rescues.

At the center of the potential plan is a mechanism that would take bad assets off the balance sheets of financial companies, said people familiar with the matter, a device that echoes similar moves taken in past financial crises. The size of the entity could reach hundreds of billions of dollars, one person said.

Bernanke, Paulson, Cox and Senate Banking Committee chair Dodd join other leaders from the House and Senate for a meeting at the U.S. Capitol.

Another proposal would be the creation of federal insurance for investors in money-market mutual funds, coverage akin to the insurance that currently safeguards bank deposits. The move is designed to stem an outflow of funds as consumers start to worry about even the safest of investments, a sign of how the crisis is spreading to Main Street. There is $3.4 trillion in money-market funds outstanding.

In addition, the Securities and Exchange Commission is set to propose a temporary ban on short-selling. It's not clear how broadly the ban might extend, but it could apply only to financial stocks.

Details of the plan were still being worked out Thursday night and could be delivered to Congress in "hours," said Senate Majority Leader Harry Reid of Nevada.

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