Clicking "Downloads" in Finder does nothing. How can I repair it? When I click the Downloads item in the Finder, it does nothing. 

The previously highlighted item remains highlighted. 



How can I fix this? 

If I open a console/bash prompt I can see that ~/Downloads exists.  The mode is 755 and I am the owner.
I can think of two different ways to address this:

Method A)


Remove the "Downloads" icon from the side bar (hold the cmd key, drag it out of the side bar)
Navigate to your home folder, and drag the "Downloads" folder back to the side bar


Method B) Caution: this will completely reset any changes you made to the Finder sidebar


Go to your user's "Library" folder (in Finder, hold the "Alt" key, and and pull down the "Go" menu at the top of the screen. You should see "Library" as one of the options)
In ~/Library/Preferences folder, move "com.apple.sidebarlists.plist" to the Trash
reboot (or log out of your account, and then log back in again)