Cable comic Jon Stewart’s smackdown of CNBC money show host Jim Cramer is now the stuff of legends.

But as Stewart was at pains to point out, he wasn’t singling out Cramer for his wrath. Stewart wanted to know why the entire business-financial news media were MIA during the decade-long run-up to this financial implosion.

Here’s part of the answer. Most journalists have forgotten, or never learned, how to do real investigative legwork. They don’t know how to dig up a paper trail. In addition, they are mesmerized by access to the top officials or top executives and don’t want to bother with those they consider low-level “nobodies.”

It’s those so-called nobodies and those documents, however, that can bring mischief to light and provide reporters/television show hosts with the questions they should be asking.

This point is well illustrated by the film The Pelican Brief. The reporter who covers the Supreme Court, Gray Grantham, did not rely exclusively on interviews with bigwigs. One of his best White House sources was a man who shined the floors and cleaned the carpets. Grantham was also willing to meet with and listen to an unknown law school student in pursuit of what turns out to be the story of the year.

Not many DC journalists today would be so open-minded or resourceful. To be fair, they are being squeezed ever tighter by layoffs and cutbacks in resources to do their jobs.

So they stick to pursuing the trivial and inane to fill airtime or newshole and make their deadlines. And more and more their audiences tune them out or stop subscribing because what they’re getting is worthless trash. Without the audiences, advertisers leave, leading to more newsroom cutbacks.

The only way to stop the vicious cycle is to start doing real journalism, covering stories that are so important people can’t wait to get to the news.

Don’t expect the media conglomerate bean counters to get that message any time before their empires crumble from total irrelevance. It’s really bad when a cable comedy show host is the one taking journalists to task.

First the $850 billion bailout was intended to purchase questionable mortgage-related securities.

Then Treasury Secretary Henry Paulsen announced plans to invest directly into banks, which promptly sat on the money or gave their top executives big bonuses instead of starting to make loans again.

Now, in yet a third course correction, Paulsen says the rest of the bailout bucks (400 billion of them) will focus on consumer debt, nonbank financial companies, and homeowners facing foreclosure.

No, the Bush administration has not (finally) developed an actual case of compassionate conservatism. It’s that all those troubled mortgages repacked into bonds simply don’t exist. You read that right. They are figments of Wall Street’s imagination and boundless greed.

Michael Lewis, author of Liar’s Poker, reveals the full extent of the mess in an article that should be required reading for every current and incoming member of Congress and the administration of President-elect Barack Obama.

Bottom line: $850 billion–or all the money in the world–won’t work because there is nothing to bail out. It’s all smoke and mirrors. The real end of Wall Street cannot come a moment too soon.

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.