The financial meltdown on Wall Street is more than a cyclic correction brought on by a mismanaged business cycle. It is emblematic of a problem at the very foundation of the right wing economic philosophy that became conventional wisdom during the Bush years -- and would be continued in a McCain presidency. The zealots of unfettered \"free markets\" cast aside the critical lesson that the world learned during the Great Depression: left to their own devices, unregulated financial markets do not necessarily function to benefit the society as a whole -- or, in the end, even many individual market participants. For many years after the Great Depression, most mortgages were provided by banks and savings and loans. Traditionally these institutions would originate their own loans, evaluate the risk, and maintain a relationship with the borrower. It was in the self-interest of the institution to make loans -- that\'s how it made money. But it was also in the institution\'s interest to assure that the borrower could pay the loan back, because it was lending its own money.Over the last thirty years, the mortgage market has fundamentally changed. Now most loans are originated by brokers or other mortgage companies who make their money through \"origination fees\" and often payments from big, unregulated lenders. Once these loans are made, they are then packaged and sold as securities through the secondary mortgage market.Mortgage originators had every incentive to make all the loans they could, but absolutely no incentive to assure that the borrowers could pay the loans back. Credit standards were relaxed, new \"sub prime\" products were introduced, \"no-document\" loans were issued.\n\nThis system provided a great dealof liquidity to the mortgage industry. But it also removed the risk of making the loan from the loan originator and handed it to a huge, diffuse \"market.\" No longer did any individual or institution have any individual incentive to prevent bad loans. \n\nThe problem was simultaneously hidden and exaggerated by the creation of complex derivatives -- securities that sliced and diced the risk and allowed it to be sold and resold. As long as housing prices went up, the problem of bad loans were hidden by the rising equity of the collateral -- the But homes that were being financed. But once pricesstopped rising and began to drop, the bottom fell out. \n\nSo now the chickens are coming home to roost. The taxpayers are helping to bail out some of the players, the stock market is tanking, mortgages are harder to get -- further reducing home values and making the problem worse. And unbelievably, John McCain told his audience that he would \"clean up Wall Street.\" John McCain\'s chief economic adviser is Phil Gramm -- a former economics professor -- who is now Vice Chair of UBS, a huge international financial company. He\'s the guy who said that the problems of the American economy were \"in theminds\" of the American people -- that we are \"a nation of whiners.\" Gramm is an ardent advocate of precisely the right wing economic philosophy that caused this problem in the first place. \n\nGramm and McCain believe in letting the guys with all the money do pretty much what they want because, they say, it will ultimately benefit us all. They are the ultimate crusaders for \"trickle down economics.\" \n\nThe problem is that the foundational principles of this economic view have been proven wrong by history. And after a while, the victims are no longer limited to the vast majority of Americans thathas suffered for the last eight years -- the pain even spreads to the wealthiest denizens of Wall Street. As Barack Obama said yesterday, we hear a lot about the benefits of the economy \"trickling down;\" now we\'re beginning to see the pain of the economy \"trickle up.\" \n\nThe central lesson of this saga is clear. If you like the Bush economy, hire McCain. Over the next seven weeks, however, Americans who care about our economic future have to join Barack Obama in saying: enough.\nhttp://www.huffingtonpost.com/robert-creamer/why-the-financial-meltdow_b_126802.html Barack, Biden, debate, economy, energy, gas, interview, Iraq, Joe, john, lie, Maddow, Mccain, Obama, oil, Palin, Rachel, Sarah, speech, tax