"Like an out-of-control forest fire" — that's how Scott Anderson, senior economist with Wells Fargo Economics in Minneapolis describes the nation's financial crisis that mushroomed this week.

Anderson said while he has qualms about the federal government "running our financial system," the Federal Reserve Bank and Treasury Secretary Henry Paulson were right to step in.

"I think we were days away from an implosion in our financial structure and that would have had catastrophic consequences on our economy," Anderson said Friday, in an interview.

Several other local economists agreed that federal action was essential.

A "crisis of confidence" got everyone "paralyzed," said David J. Ward, president of NorthStar Economics in Madison, and nothing short of a massive government action would work.

Money market funds were the tip-off, Ward said. "It was like a disease or a virus had penetrated into money market funds. A couple were left with less than $1 asset value. When you start losing principal on money market funds, you're going to start scaring people right down to Main Street," Ward said.

Money market funds are the same as cash for a lot of investors and households, Anderson said. "What we were seeing happen was people wanted their money back," he said.

"It is the modern equivalent of a bank run."

As a result, credit markets "have seized up," Ward said, and that can jeopardize large construction projects and business lending, crippling the economy. "We're in the too-big-to-fail stage here."

Now, the Fed and the Treasury Department are going after "the heart of the problem — questionable mortgage-backed security debt," said Jeff Heinrich, associate professor of economics and chairman of the economics department at UW-Whitewater.

"The problem is, nobody wants it. It's toxic waste," Heinrich said.

So the securities are being purchased at reduced prices. "Then if the banks start lending and borrowing money again, they can (restart) the credit markets," he said.

But bailing out the huge financial institutions creates big moral questions.

"In a crisis, ethics and principle do go out the window," said NorthStar's Ward.

James Johannes, UW-Madison School of Business finance professor, said rescuing the companies that are too big to fail creates "perverse incentives. I am bothered by policies that privatize gains and socialize losses," Johannes said. "If we do bail out failed financial institutions, we need to make sure that senior executives at those institutions are barred from practicing finance again."

Wells Fargo's Anderson said while economists never want a solution that puts taxpayer and U.S. Treasury finances at risk to correct problems of a profit-driven industry, the current situation is "a Great Depression-style financial crisis that requires a Great Depression-style solution," one that only the government can handle.