Now what?

The U.S. House of Representatives sent D.C. and Wall Street into convulsions by refusing to pass the Bush bailout even with modifications negotiated by the Democratic leadership. (Perhaps there’s life in our republic yet.)

Trickle up economics, that’s what. Let’s keep our eyes on the ball here. The real foundation of the current mess is the deflation of housing prices that were propped up artifically in the bubble ignored and/or denied by the very experts in charge of the rejected so-called solution.

The air is still going out of home prices, although the rate of decline has slowed over the last three months. See the latest figures from Standard & Poor’s/Case-Schiller 20-city housing index released today.

If we want to stem the crisis and help Main Street, then the solution is obvious. Set up a government mechanism to review existing troubled mortgages and rework them so that the owners of the homes (provided they also live in them) can afford a new monthly mortgage payment. Those houses with troubled mortgages not occupied on a daily basis by their owners would be subject to much stricter reworking rules.

The government can also inject capital into troubled Wall Street businesses in return for a part ownership position and temporary management authority–the same way private investors operate. This gives taxpayers a real shot at a return on their tax-dollar investments future when the government sells its stake in the future.

This trickle-up approach immediately will help restore neighborhoods lost to the blight of foreclosure, and eventually stablize the finances of troubled investments banks and securities firms that bought into exotic and toxic investments backed by questionable mortgages.

That’s the way to proceed because it does not reward Wall Street for its greed and total failure to self-regulate.

Next Step: Undo degregulation with more nimble reregulation that is adapted for 21st century electronic exchanges. This can and has to be done to restore long-term worldwide confidence in the U.S. economy and markets.

Respected economist Dean Baker gives the modified bailout–ooops, that’s “buy-in”–a huge thumbs down this morning.

His reasons for opposing it make a great deal of sense amid the same kind of alarmist blather that preceded and precipitated the  U.S. invasion of Iraq.

Even in its altered form, this bailout is essentially the economic version of the way the Bush administration pressed for invasion. That alone makes it suspect.  It’s the classic Bush M.O. Distract and dismay with a specter of some kind of imminent doom and then shovel money to your cronies and campaign donors.

Additional economists have also expressed strong reservations about the modified bailout and say there are ways to stabilize Wall Steet without putting taxpayer money at risk. These are worth a shot before handing over to the Treasury Secretary the enormous power  bestowed by this bailout plan–especially when there is no guarantee that it will stave off the steep economic downturn that it it supposed to avert.

The Democrats cave again–and we’ll all rue the day.

There’s more than one way to avert a nasty economic slump.

Kudos to McClatchy Newspapers for a very different take on the proposed Wall Street bailout.

Reporter Kevin G. Hall quotes economists and analysts who doubt that the Wall Street-oriented proposal will actually stave off a deep recession.

They include James K. Galbraith at the University of Texas, Simon Johnson at MIT,  Kenneth Rogoff at Harvard, and Ed Yardeni.

All four think the proposal is flawed and rushed, and point to better and cheaper ways to restore enough confidence so that banks are willing to lend again at reasonable rates.

Why not do what the federal government did during the Great Depression? It would probably cost no more than $700 billion just to buy up homes in forclosure and rework the mortage terms so that the current owners can remain in them.

This approach would definitely help Main Street, and since the problems on Wall Street originate with investments backed by shaky mortgages, it will help there as well. Trickle-up economics, for a change.

Then we have to get back to across-the-board financial industry reregulation so that the same problems don’t pop up down the road.

To do that, however, we’ll have to elect a Democratic president as well as Senate and House of Representatives.

In his own words, the Republican candidate is “fundamentally a deregulator” and helped push the deregulation laws that helped get us into this mess in the first place.

If John McCain’s gameplan was to knock Barack Obama off stride in discussing foreign policy issues or the question of experience, he failed during tonight’s first debate.

Maybe that’s why the Republican septuagenarian presidential candidate repeatedly resorted to snarky condescension. His favorite phrase: “I don’t think Sen. Obama understands…”

Here’s what some of us understand only too well. Earlier this week, McCain claimed he was halting his presidential campaign to go to Washington and would remain there until some sort of Wall Street bailout deal was completed.

McCain didn’t stop campaigning, however. He kept right on campaigning and so did his surrogates and staff. In fact he didn’t leave for Washington D.C. until the day after he made his grand announcement about an emergency so dire that it required all presidential politicking to cease immediately.

There was no finalized bailout agreement, yet McCain left D.C. anyway to take part in the debate. Flip-flop.

How many more “hail Mary” passes does this guy get? He looked far more desperate this week than presidential, at once clueless and conniving. If this week is an example of how he will handle an emergency when he is in the White House, he’s a poor choice.

Like the coach said: “It’s deja vu all over again.” 

I have seen this before. I am writing fiction about my past-life experiences with theocracy and would-be religious totalitarians.

But this is only too real. And it’s not about faith or country or patriotism. It’s about raw power and total control.

Read this post by Naomi Wolf, author of The End of America, for more insight into how GOP vice presidential candidate Sarah Palin personifies “end times” for our experiment with democracy and the beginnings of theocracy.

http://www.huffingtonpost.com/naomi-wolf/the-battle-plan-ii-sarah_b_128393.html

Can you feel the approaching political Rapture?