Obama, other senators ask attorney general to weigh in on foreclosure list controversy

The timing of this current wave of nationalization-as-bailouts could have been anticipated for years now; you can thank Phil Gramm, senior adviser to the McCain campaign since he was a key proponent for keeping Credit Default Swaps unregulated.

Frankly, this is all of a piece:

–tax and monetary policy creates ridiculously cheap money to keep economy afloat during Bush's first term, but after the Bush tax cuts have worn out their ability to prop up the economy;

–cheap money increases speculation in housing;

–predatory lenders made loans with the cheap money to people who did not have an adequate level of collateralization for traditional loans;

–these lenders resold these loans which in turn were bundled as CDO's

–investment banks like Bear Stears (RIP) and Lehman Brothers (now bankrupt) purchased the CDO's as part of their portfolio;

– credit market tightens for many reasons, including the demand for money due to the Iraq War
– speculators drive up the price of commodities, which in turn force borrowers to default on loans and make credit market even worse;

– foreclosures increase and property values fall, forcing lenders at all points of the credit spectrum to have fire sales to raise cash to cover obligations;

– investment banks can't sell assets fast enough as they have the least amount of actual collateral;

– the guarantors of mortgages (Fannie Mae, Freddie Mac) find themselves upside down when too many loans go bad;

– the insurer of mortgages (AIG) can't sell assets fast enough to raise cash to cover obligations either;

– and the U.S. Government has little remaining options in its arsenal save for nationalizing these failing entities since choosing not to do so would crash the market globally, and the rich guys that own Congress and the White House wouldn't like that at all.

And this all goes back to the propping up of the economy during Bush's first term, likely coincident with the market slide post-9/11

Who was in office? What party held the majority in Congress? Which party has benefited the most from this propped up economy?

Phil Gramm may have been nominally correct when he said the problem with the economy is all in our heads — if more Americans were actually literate about the economy, they would realize that this week's frenzied nationalization was set in motion more than 6 years ago.

And it's got nothing to do with lipstick and everything to do with demanding better governance and a better grade of politician and more analysis on the part of the American people instead of shallow talking points on earmarks.