And the wheels came off

Some are already calling it "Black September".

If you’ve been following what’s been happening in the economy and markets, as I have, you are probably shaking your head in dismay. Even I, the eternal doom-and-gloom pessimist, didn’t expect that what happened over the past 3 weeks would snowball so quickly.

Events in the markets and the financial sector are moving faster than the reactions from the government and public can keep up. There doesn’t seem to be any real leadership about how to deal with multiple converging crises either. That light at the end of the tunnel is looking more and more like a train. Insert your own disastrous metaphor or cliché here.

To recap: the worlds largest mortgage insurers and buyers, Fannie Mae and Freddie Mac, have been effectively nationalized. One of the biggest and oldest investment banks, Lehman Bros., went belly up. Another, Merrill Lynch, would have too had it not been swallowed at the last second by the Death Star, otherwise known as Bank Of America. The only remaining Wall Street investment banks, Goldman Sachs and Morgan Stanley, had to desperately change their business model and get permission to reorganize as commercial banks. Washington Mutual collapsed last night and is now the largest bank failure in American history. Other banks such as Wachovia are looking increasingly fragile. Credit markets have frozen.

AIG was bailed out at the last minute by the government after agreeing to giving the government an equity stake. It was the first-ever government bailout of an insurance company. Wendi’s mom works for AIG, but now she effectively works for Uncle Sam.

Some of you may recall that I work for a wholly-owned subsidiary of Morgan Stanley. I do not know what the future holds, only that I have a personal stake now in what is happening. This week Morgan Stanley was courting the sickly Wachovia for a potential marriage. This did not make me feel good inside, but I laughed anyway when I heard it. This is getting more and more absurd by the day.

And, biggest of all, our fine, upstanding elected leaders are furiously debating how to force the rest of us to pay for the mistakes of guys who make more in a week than I do in a year, by throwing $700 billion of new debt into their begging hands. After basically denying for almost a year that there was any systemic problem, Secretary of the Treasury Hank “the shank” Paulson now says that financial catastrophe is imminent unless we do whatever he says. This is such a repulsive idea to some Republicans that even they balked at the price tag – and they have never been shy about spending money that they didn’t have.

Yes that’s right. Socialism, economic disaster, higher taxes and big government brought to you on a platter by the party of small government, low taxes and business. Wow. Choke it down and like it, it’s for your own good, they say.

Hypocrites, liars and thieves – are those words too strong? I don’t think so.

Not that the Democrats are much better – in many ways I have more problems with them than I do the GOP. The point is that the old paradigms are useless and the failure of leadership, laziness and corruption of our corporate-controlled government, combined with the unsustainable and fantasy-based economic model that it promoted, have brought us to this point. History is being made these past few days, keep watch on what happens next because it's going to be interesting... in the ancient Chinese sense.

I do not have the answers, just a few ideas that maybe I’ll write about some other time. For now, one of my favorite blogs about economics says it much better than I can.