The financial crisis that began 13 months ago has entered a new, far more serious phase.Lingering hopes that the damage could be contained to a handful of financial institutions that made bad bets on mortgages have evaporated. New fault lines are emerging beyond the original problem -- troubled subprime mortgages -- in areas like credit-default swaps, the credit insurance contracts sold by American International Group Inc. and others firms. There's also a growing sense of wariness about the health of trading partners.

Don't let them tell you this economic meltdown is a complicated mess. It's not. Our national financial crisis is readily understood by anyone who has seen greed and hypocrisy. But we are now witnessing them on a profound, monumental scale.

Conservative Republicans always want the government to stay out of business and avoid regulation as long as they are making lots of money. When their greed, however, gets them into a fix, they are the first to cry out for rules and laws and taxpayer money to bail out their businesses. Obviously, Republicans are socialists. The Bush administration has decided to socialize the debt of the big Wall Street Firms. Taxpayers didn't get to enjoy any of the big money profits on the phony financial instruments like derivatives or bundled sub-prime paper, but we get the privilege of paying for their debt and failures.

Let's just consider the money. The public bailout of insurance giant (becoming a dwarf) AIG is estimated at $85 billion. According to one report, that's more than the Bush administration spent on Aid to Families with Dependent Children during his entire time in office. That amount of money would also pay for health care for every man, woman, and child in America for at least six months.

The (newly designed and very nice looking) Wall Street Journal website has a great article about the current financial problems. This is not a discussion of how we got here, but more specifically of why it is hard to correct the problems. The key is an orderly de-leveraging of financial firms. Firms have to unwind their debt and build up capital. Unfortunately, as they sell assets to reduce positions, the value of these assets decline, worsening their capital position. We're in a sort of death spiral. It is looking more a more likely that more government intervention will be needed to help these firms get out of their debt positions. This obviously brings with it unpleasant questions about who gets bailed out and who doesn't.

Is there any doubt that we're in the worst economic crisis since the Great Depression? Let's review the tally:

Insurance Industry -

• AIG Bailout (today an 85 billion loan) connected to deregulation of insurance banking as well as the Housing crisis.

Banking Industry -

• Lehman Brothers (failure)
• Merrill Lynch
• Bear Stearns
• Stock market taking a bit hit (effects everyone's pensions)

Housing Industry

• 10,000 foreclosures per DAY
• over 1.2 million forclosures in process (with protection for only 450 thousand people)
• housing contruction is at a 17 year low
• Sales fell 6.2 % in August
• Countrywide Financial collapses and is bought out

Auto Industry -

• The auto industry is requesting a $25 billion bailout as plants close across the country (devasted by the decision to sell gas guzzlers and the advent of $4 a gallon gas).

Energy, Inflation, Unemployment -

• Crisis level, major blow to economy effecting absolutely every sector with particuar pain being felt in transport and travel industries. Unemployment is rising quickly, partly in response to the other faltering sectors.

House Speaker Nancy Pelosi lashed out at President George W. Bush and Republican presidential candidate John McCain, calling the troubled economy a "man-made disaster" and criticizing the president for not explaining more to the American public.

"This morning at the White House and throughout the presidential campaign one thing is clear: George Bush and John McCain have no credibility when it comes to the economy," Pelosi said at a news conference. "Just the brevity of the president's statement. We wondered if he was ever going to come out of hiding on this subject. He came out for one minute and said very little."

Pelosi said Bush should have explained what's going on with the financial crisis and offered an "an apology to the American people for the situation that we are in." She also said both Bush and McCain have "no credibility" when it comes to the economy. "How else could John McCain, in the midst of the greatest financial crisis since the Great Depression, tell the American people the fundamentals of our economy are strong?"