THE BLOG
10/17/2008 05:12 am ET Updated May 25, 2011

A plague on the Wall Street casinos

America's biggest substance abuse problem is money. Like a crack addict in charge of the drug squad, Washington did little to nothing to control the artificial creation of credit. That is because the Wall Street casinos enabled, with their recklessness, the ability for the Republicans to finance massive budget deficits, trade deficits, an unnecessary war in Iraq and unjust tax cuts for rich people.
This weekend, was the addict's first intervention or the decision by the U.S. Treasury Secretary to stop subsidizing these "drug" dealers in pinstripes. Lehman Brothers is only the first of a number of bankruptcies, shotgun marriages and restructurings that will sweep the street and should.
Unfortunately, the withdrawal symptoms will also cause a number of business failures in other sectors, more job losses, stock and real estate declines and higher borrowing costs for everyone. The hang-over will last for years.
Obama will blame the Republicans, and should. McCain will try and convince Americans he's not a Republican.

The fix may work
In the long run, and ideally, this will sort itself out as the gamblers will be driven out of the business and Wall Street will be absorbed into heavily regulated commercial banking conglomerates.
This is as it should be. As financial guru James Grant, of Grant's Interest Rate Observer, said last year: "Capitalism without financial failure is not capitalism at all, but a kind of socialism for the rich."
The game had to stop following years of reckless leveraging by Wall Street on top of reckless sub-prime lending.
One estimate is that for every $1 of mortgage, Wall Street and its clients piled on top $8 of side bets in the form of options and goodness knows what secured by that original $1 of mortgage.

The culprits are obvious
Much of the blame rests with Washington's Republican regulators who are controlled by the executive branch: the Comptroller of the Currency, SEC, Treasury and the Federal Reserve. Here are the worst drug dealers:
1. Ten years ago, Long-Term Capital Management had to be bailed out and yet former Federal Reserve Chairman Alan Greenspan (a Republican) waved off lawmakers trying to rein in hedge funds, who are among the biggest culprits in this meltdown.
2. For five years, Washington regulators never questioned the securitization of mortgages which spread the financial leveraging like wildfire.
3. Efforts by New York's former Governor and Attorney General Eliot Spitzer to control mortgage lending practices across the country were fiercely fought off in courts by Bush regime officials.
4. And securities officials, in the U.S. and Canada, recently scrapped the uptick rule, which allows short sellers to start rumors and create more drama and panic.
Problems will hit the economy as a whole but the negative fallout will mostly affect the financial sector. About 135,000 have lost their jobs worldwide so far, but remember that in 2006 the bonuses to the worldwide payroll of the five biggest Wall Street-owned firms in New York City was equivalent to the GDP of Vietnam.
So no tag days for gamblers and a plague on the Republicans for their reckless economic negligence.