Wanna wanna let it burn

The distractions of the campaign can make you forget how maliciously irresponsible the Republican Party has become:

"Once again the Fed has put the taxpayers on the hook for billions of dollars to bail out an institution that put greed ahead of responsibility and used their good name to take risky bets that did not pay off," said Sen. Jim Bunning, R-Kentucky, a member of the Senate Banking Committee.

A spokesman for Sen. Richard Shelby of Alabama, the top Republican on the committee, said the senator "profoundly disagrees with the decision to use taxpayer dollars to bail out a private company" and is upset the government has sent an inconsistent message to the markets by bailing out AIG after it just refused to save investment bank Lehman Brothers from bankruptcy. |CNN|

Opposition to a clearly necessary step speaks for itself. Truth be told, the likes of Shelby and Bunning are probably glad Congress wasn't consulted. What they're doing now is warming up for the post-bailout fight about the extent of regulatory oversight. Care to guess which side they'll be on?

And by the way, how do you square the circle of blaming greed for this crisis? There are no significant allegations of shoddy accounting or fiduciary irresponsibility. At every level, from home buyers accepting sub-prime loans to lenders offering those loans to derivatives traders betting on the security of those loans to insurers backing those bets, every actor was doing exactly was free market absolutists like Bunning and Shelby thinks that they should be doing. They were seeking to maximize profit.

I'm no economist, but the basic shape of the current crisis is clear enough. It begins with a wide range of policies with generally bipartisan support that overly favored investment in housing, investments which were almost entirely based on credit. Next, the decades long Republican campaign against regulation meant that there was limited oversight over the financial sector's handling of this huge mountain of debt. Throw in the bankruptcy bill and a weak economy, and Bob's your uncle.

This is what is sometimes called a cascading failure. No one thing caused it. Instead, the interaction of several independent factors brought about the crisis.

What's striking is that despite the complexity of the cause, the blame is abundantly clear. At almost every step, the underlying explanation for how we got into this mess is the laissez faire economic ideology that Republicans have been campaigning on for decades. I mean, can you even believe that derivatives remain substantially unregulated seven years after Enron?