Years from today, when the current financial crisis is over, historians are likely to agree that it would have been far better if the Bush administration had declared a state of emergency earlier in the process so that the necessary steps could have taken to avoid a complete financial meltdown. The media could have been used to bring the American people up to date on market-related developments and educated in the bizarre language of structured finance. Knowledge is power; and power can prevent panic.

Now we're in a terrible fix. People are scared and removing their money from the banks and money markets. This is intensifying the freeze in the credit markets and driving stocks into the ground like a tent stake. Meanwhile, our leaders are caught in the headlights, still believing they can finesse their way through the biggest economic cataclysm since the Great Depression.

If something is not done to increase the flow of credit immediately, the stock market will tumble, unemployment will spike, and many businesses will grind to a standstill. We could be just days away from a severe shock to the system. Secretary of the Treasury Henry Paulson's $700 billion bailout does not focus on the fundamental problems and is likely to fail. At best, it puts off the day of reckoning for a few weeks or months. Contingency plans should be put in place so the country does not have to undergo post-Katrina bedlam. [More]

Stephen Pearlstein is the Washington Post’s Pulitzer Prize-winning business columnist. In print and as a TV talking head, Pearlstein is one of the foremost media cheerleaders for the $700 billion Wall Street bailout bill. Or should we call it the Bush-Paulson-McCain-Obama-Pelosi-Reid-Dodd-Frank Wall Street bailout bill?

While the U.S. Senate predictably capitulated to the demands of Wall Street, for the first time in recent memory the House listened to the American people and blocked Paulson’s bailout of his rich buddies by U.S. taxpayers. The same House that refuses the public’s demand that the Bush regime be held accountable and its gratuitous wars halted refused to hand over $700 billion to the financial institutions whose irresponsibility has brought the U.S. to its worst economic crisis since the Great Depression.

We must be thankful for this sign that American democracy is not completely dead and supplanted by executive branch authority. However, whatever bailout package that emerges will fail unless it takes into account the following.

Any package that maintains the mark-to-market rule and permits the resumption of short-selling will undermine itself. In panic conditions without the existence of a market, the mark-to-market rule results in asset prices being driven below their values, thus eroding balance sheets and producing insolvencies. Short-selling permits short-sellers to profit by destroying the share prices of institutions suffering balance sheet problems, thus eliminating their ability to borrow and driving them into failure. A bailout, however large, that maintains the mark-to-market rule and permits short-selling will pour money into a black hole. [More]

Call it the consequences of irresponsible American invasions, call it the irrational exuberance of short sellers, call it the catastrophe of subprime lending, call it the mismanagement of leveraged products, blame it as you may, American markets are facing unprecedented meltdown and doomsayers see little promise in the federal bailout package. Ironically, the Wall Street has noticed that Shariah-compliant investments - which avoid speculative risk and debt-ridden greed - have fared much better in these troubled markets...

The Quran prohibits speculative risk, warning the faithful to avoid games of chance in which the probability of loss in is much higher than the probability of gain. Shariah-compliant investments, therefore, avoid speculative risk, including interest rate options, naked equity options, futures, derivative and numerous leveraged products purportedly designed to hedge investments. Many of these financial products attract speculators in hopes of making quick money... In addition to prohibiting high risk investments, the Quran also prohibits no risk investments... Islam does not prohibit passive investments. Nor does it prohibit giving interest-free loans. Debt is not contrary to Islamic law. Charging interest is.

The federal bailout package that the Bush Administration is selling as a quick cure of all problems will only aggravate the underlying cancer of interest-bearing debt. It is unlikely that the infusion of more money will reform institutions and companies built on layers of interest-bearing debt. When the best and the brightest are engrossed in finding ways to make money with money, and no more, the system may look creative and intelligent but it is geared toward shared destruction. [More]

The Onion versus the 2008 U.S. Presidential Election.

An American complains to an Australian journalist “My vote doesn’t count… but I’m still going to vote”. It’s the Electoral College that counts and there’s only 7 states left that will decide whether Obama or McCain inherit the biggest mess in history. But don’t panic.

The latest Michigan poll gives Obama a 5% gap putting the state with Obama instead of being a Tossup. CNN now gives Obama a 9% gap in Pennsylvania (Joe Biden was born there & represents next door Delaware). These 2 states give the Obama camp 255 of the 270 electoral college votes they need. The New York Times still lists another 6 states as Tossups (Ohio, Virginia, New Hampshire, Colorado, New Mexico, Nevada & Arizona) but Florida has also come into play with a 48%:48% CNN poll.

So, as long as the electoral votes in his camp stay steady, there are now 4 independent pathways to an Obama victory. If he wins either Ohio (ahead) or Florida (dead-even) he wins straightup. If he wins Virginia (ahead) and any other tossup state he wins. Or, the long shot, if he wins New Hampshire (ahead), Colorado (ahead) and New Mexico (behind), or any other ‘red’ state, he wins without needing Ohio, Virginia or Florida.

Of course standing against those pathways is the Supreme Court and a mass of extremist media outlets like Fox News. On the other hand there is a 5th way he might win – any combination, or all, of the above and they’ll start to call it a landslide. An Obama victory won’t solve the planet’s problems but it might give America a chance to avoid destroying itself and taking the rest of us with it. It’s a chance. The rest of the world hopes you take it.

Democratic Party powerbrokers have certainly been privy to the inner workings of the financial feeding frenzy that has unfolded on Wall Street over the last two decades and are as complicit as any Republican in enabling the same firms now being bailed out with American taxpayer dollars. It could also be argued that their liberal rhetoric is a key component of the selling job now needed to contain a popular revolt against the unbridled greed that has brought the U.S. financial system to the brink of collapse...

[Democrat] Congressional leaders Dodd, Schumer and Frank all embraced the $700billion federal bailout from the beginning and remain its biggest champions. Alas, the only principled opposition to the federal bailout has come from the most crackpot wing of the Republican Party. As Jim Bunning, one of that wing’s spokesmen, protested, “This massive bailout is not the solution, it is financial socialism. It is un-American.” (These knee-jerk conservatives seem not to understand that the basic tenet of socialism requires the redistribution of wealth downward, not upward, as this bailout will accomplish)...

The proposals being floated by Democrats to soften the blow of the bailout will provide no relief from rising gas, food, housing and healthcare costs crippling those who rely on their own labor to earn tangible income — nor will it protect the thousands of workers who lose their jobs in the coming months. [More]