Party's Over

When conservative commentator Bill O'Reilly declares that the current economic crisis marks the end of Bush's legacy, then you really know that the party is over:

This is the end of President Bush's legacy... He’s done. He’s through... He will now go down in history along side Jimmy Carter as an ineffectual leader particularly in the last four years with Iraq and now the economy just imploding. And I’ll tell you the reason why: it’s poor leadership on his part. The people that he picked to run certain things have been disastrous. And no leadership and now Americans are getting hurt.

I'm glad O'Reilly is finally catching up to the rest of us who noticed the ineffectual leadership six, seven, or eight years ago. In fact, I wish I could give some kind of award to the Onion for the divine wisdom and warning they gave us three days before Bush's inauguration in 2001.

But even the Onion couldn't predict the foreclosure crisis. Predicting one in every 50 households receiving a foreclosure filing in some California counties would have seemed a little over the top even for a satire magazine... but that's exactly where it's at right now:

California cities accounted for eight of the top 10 metro foreclosure rates out of the 230 metro areas tracked in the August report. Stockton was No. 1, with one in every 50 households receiving a foreclosure filing during the month, followed by Merced, Modesto, Vallejo-Fairfield and Riverside-San Bernardino in the Nos. 2 to 5 spots. Other California cities in the top 10 were Bakersfield, Salinas-Monterey and Sacramento in the Nos. 8 to 10 spots.

The overall rate is one in every 416 U.S. households receiving a foreclosure filing during the month of August. That's up 27% from August 2007.

So, I'm trying to make sense of this, and not really understanding economics, I ask my friend Trung who is working on his masters degree in econ at the University of Missouri Kansas City:

ME: So explain the current economy to me?
TRUNG: I can summarize it in two words: it sucks.
ME: I wanted something more technical. Quote a little Thorstein Veblen for me.
TRUNG: Shit. He would go off on a tangent and not really explain it. In fact, I think his explanation would be filed with nonsensical mumbo jumbo and dances around the issues.
ME: How come Sarah Palin said government needs to stop meddling? And do you agree with her?
TRUNG: I'm not sure to what she's referring to in terms of government meddling. If She's saying meddling in loaning billions of dollars to these companies, I can understand why it might be a risk because it's our tax dollars going towards these companies.
ME: I was under the impression she meant fewer regulations.
TRUNG: Hmmm. Well, I'm not sure if I'm a good person to comment on it... neoclassical econ is a thing of the past.

I give Trung a lot of credit for even studying this stuff and then trying to answer my impromptu questions after a hard night of salsa dancing. Anyway, I can't expect any econ student to understand the takeover of AIG (American International Group Inc.), when the Bush administration is now putting themselves in uncharted territory:

It puts the government in control of a private insurer -- a historic development, particularly considering that AIG isn't directly regulated by the federal government. The Fed took the highly unusual step using legal authority granted in the Federal Reserve Act, which allows it to lend to nonbanks under "unusual and exigent" circumstances, something it invoked when Bear Stearns Cos. was rescued in March.

So, that seems to take care of this week's crisis. But where's the full story on how we got here?

A few days after declaring that "the fundamentals of our economy are still strong," John McCain is now calling for a high-level commission to investigate the securities industry.

However, McCain only needs to look as far as his once senior economic adviser, Phil Gramm. Gramm spearheaded the landmark Gramm-Leach-Bliley Act in 1999 which repealed the Depression-era Glass-Steagall Act. Yesterday, The Washington Post reported on McCain and Gramm's decades of dismantling regulations and their new condemnation of "casual oversight":

McCain now condemns the executives at those companies for pursuing the ambitions that the Gramm-Leach-Bliley Act made possible, saying that "in an endless quest for easy money, they dreamed up investment schemes that they themselves don't even understand."

He said the misconduct was aided by "casual oversight by regulatory agencies in Washington," where he said oversight is "scattered, unfocused and ineffective."

"They haven't been doing their job right," McCain said yesterday, "or else we wouldn't have these massive problems on Wall Street, and that's a fact. At their worst, they've been caught up in Washington turf wars instead of working together to protect investors and the public interest."

Yesterday, Obama seized on what he called McCain's "newfound support for regulation" and accused his rival of backing "a broken system in Washington that is breaking the American economy."

Broken system. Quest for easy money. Imploding economy. And no long-term solutions. What a party! And I was never even invited. Sounds like we'll all take part in the clean-up though.