The Crash of '08 forces Americans to watch history repeat itself. In 1929 unregulated Wall Street greed brought down our economy. In the '30's our leaders had the regulatory intelligence to enact the Glass-Steagall Act of 1933 that separated investment banks that game the market from commercial banks that take in money and lend it to Americans. That was a simple but profound regulatory step. Other steps included securities regulations that required investment banks and stock promoters to disclose the risks of stock purchases so that buyers could make informed investment decisions. These regulations remained in effect through the seventies.

Ronald Reagan's presidency ushered in a new period in which New Deal era securities regulations were dismantled or put to sleep in the service of an ideology that government is bad and the only reliable regulatory force in American society is the market. That ideology licensed the free play of Wall Street greed and the wrecking of the regulatory state that contributed to the Crash of ’08.

So far the only crash remediation that has come from the Bush Administration is a dictatorial Government/Wall Street partnership that has the stench of fascism. Neither Bush nor Paulson have proposed intramural reforms to cut executive salaries or impose transparency on Wall Streeters in exchange for government welfare. Rather, they contend such reforms will hurt the recovery. Paulson’s only objective is liquefying “toxic” or “unmarketable securities” to restore the ability of banks to lend money. The Glass-Steagall repeal of the mandatory separation of investment and commercial banks makes lending by the commercial bank side of Wall Street giants depend on the ability of the investment banking side to liquefy securities for cash. Accordingly, the 700 billion bailout will only fund government purchases of “toxic securities.” Paulson doesn’t know how much the toxic securities are worth. He doesn’t know which of those securities are infected with the subprime virus. He has no idea which loans in the mortgage backed securities to be sold to Uncle Sam have gone through foreclosure, so there is no real estate securing them. According to Paulson that really doesn’t matter because liquidation is the only objective and the way to liquidate is a “market mechanism” like a “reverse auction.” The investment banks wanting to dump their toxics will “bid” a price for Uncle Sam to take them off their books. If there are no other bidders, that’s the buy price unless Uncle Sam can bid lower. The buyers and sellers in the reverse auction will be Wall Street bankers. Paulson assures us that we should not worry about conflicts of interest.

Paulson did say our existing regulatory model does not fit the contemporary financial environment. That is probably true. This is an era of linked transactions. Today's home loan is packaged into a Wall Street creation called a "collateralized debt obligation" that is resold on global markets to banks, insurance companies, and investors. In turn those COD's become the focus of a Credit Default Swap to protect the COD investors. When unqualified sub-prime borrowers failed to pay, the linked set of transactions collapsed in the Crash of '08. Paulson and Bush are not giving us an outline of a plan to prevent that in the future. All of the 700 billion will be spent to restore the unregulated pre-crash Wall Street free market system; regulation, if any, is up to the next president. There is absolutely no talk from Bush and Paulson about a long term regulation plan.

This is unacceptable. There should be no government funded liquidations without new government regulation. Congress must develop at least a concept of a regulation plan before agreeing to a 700 billion blind liquidation to restore the pre-crash status quo.