It's the Stupid, Economy ... Part Deux

When can we all scream," Ohhh SH*T!!!!"

After lots of explanations that pretty much point to the savings & loans crisis and Keating 5-style financial industry greed, you, the American taxpayer, are being asked to bail the securities and trading establishment out. Not only that, but you're being told (not asked) that you will give virtual autonomous control to the federal government that will regulate your 401K, possibly preventing the comfortable retirement you were trying to provide for yourself since Social Security won't be around to do it.

Can somebody say 1984? ...

Financial Industry in Turmoil

Wells Fargo, JPMorgan Chase, HSBC and other large banks have all reportedly been approached by regulators seeking someone to rescue Washington Mutual, which has been pounded by the slumping housing market and the subprime lending fallout.

Nick Ut, AP

Some are also speculating on which firm may be headed the way of Merrill Lynch or Lehman Brothers. Media reports have said that Morgan Stanley is pondering whether to remain independent and that it is in talks with Wachovia about a possible combination.

Mario Tama, Getty Images

A trader works on the floor of the New York Stock Exchange, Wednesday, after nervous investors yanked their money out of the stock market, sending the Dow down 450 points. The latest market plunge came after a late Tuesday announcement that the government would bail out ailing insurer AIG. "People are scared to death," one investment strategist said.

Richard Drew, AP

The AIG bailout marked the second time this month that the government put taxpayer money on the hook to rescue a private financial company. In exchange for a 2-year $85 billion loan from the Federal Reserve, the government will receive a 79.9 percent equity stake in the company.

Mark Lennihan, AP

Former Allstate chairman and CEO Edward Liddy, left, is expected to replace AIG's Robert B. Willumstad. Willumstad, a former Citigroup executive, had been at the helm of AIG since June.

AP (2)

AIG, whose shares had been on a freefall, had been on the hunt for cash to shore up its balance sheet. The Fed determined that a disorderly failure of AIG could hurt the already delicate financial markets and the economy.

Richard Drew, AP

The U.S. government became one of the biggest players in the nation's mortgage market last week when it took control of mortgage finance giants Fannie Mae and Freddie Mac. The two financial institutions, battered by plunging share prices, rising foreclosures and sinking home values, owned or guaranteed about half of U.S. mortgage debt.

AP (2)

The decision to help AIG marked a reversal for the government from the weekend, when it refused to use taxpayer money to bail out Lehman Brothers. The investment bank was forced to file for Chapter 11 bankruptcy protection Monday.

Jin Lee, AP

For many of Lehman's 26,000 employees, the outlook is likely to be gloomy with job losses expected to be substantial even if significant parts of the business can be sold. On Sunday night hundreds of Lehman employees were seen clearing their desks and packing personal belongings.

David Karp, AP

Last week, after posting $3.9 billion in losses, Lehman CEO Richard Fuld outlined a plan to sell and spin off assets to raise money. Fuld, 62, who joined the company right out of college, is the longest serving CEO on Wall Street.

Kevin Wolf, AP

Dude, I mean, I really can't freaking believe that it's come to this point. What Treasury Secretary Henry Paulson is saying sounds like a threat, but there is much truth to it: if something is not done to correct the hemorrhaging of the U.S. financial system it could lead to widespread financial panic, deep recession, and some say a new economic depression.

Economists say that this comes from a decade of Americans living high-on-the-hog, and yes we've been iPodding and Rolexing it up since the mid-90s without even thinking that the good times could possibly stop rolling. But nobody ever realized that this gravy train got greasy through credit, and nobody watched the Wall Street slicksters who made criminal trades (yes, I said it) and cooked their books when something looked amiss.

But my theory is that it goes back to the Reagan years when he did everything to: 1) Deregulate the whole freakin' economy, and 2) Give healthy tax breaks to the rich as part of his malicious "trickle down economics" theory. There's a reason people hated Ol' Pruneface and this is it.

So now, Paulson and Federal Reserve Chairman Ben Bernanke are trying to push through a $700 billion, bailout package that will buy out, among other things, delinquent mortgages and flush cash into securities.This means where the Republicans called for deregulation in the 80s, they want tight regulation now. It might work, it might not. But if we do nothing, then we're screwed.

But we were screwed anyway. People should have smelled this one coming when Enron went belly up. I've got to wonder why Congress didn't vote to watchdog the securities trading industry more closely when it was clear there were snakes in the pit.

To understand this kind of behavior, check out James B. Stewart's Den of Thieves. It's a long, difficult read. But it gives you an idea what kind of unethical bastards have been given stewardship over America's free market economy.

Now, to his credit, President Bush gives a very simple explanation about the financial crisis that even he can understand. But here's what he didn't tell you: no matter what happens, get ready to do some serious belt-tightening.

Moms, do you know how to stretch butter?

READ: It's the Stupid, Economy ... Part One