Ever wonder what a "financial panic" was?

As a person who enjoys reading history I keep running across the term "financial panic." As in "The panic of 1819" or "The panic of 1837." As a modern American I am familiar with the Great Depression, and also with Recessions, but the term "panic" didn't really click with me. Now It makes sense. Here's today's Paul Krugman editorial:

As recently as three weeks ago it was still possible to argue that the state of the U.S. economy, while clearly not good, wasn’t disastrous — that the financial system, while under stress, wasn’t in full meltdown and that Wall Street’s troubles weren’t having that much impact on Main Street.

But that was then.

The financial and economic news since the middle of last month has been really, really bad. And what’s truly scary is that we’re entering a period of severe crisis with weak, confused leadership.

The wave of bad news began on Sept. 14. Henry Paulson, the Treasury secretary, thought he could get away with letting Lehman Brothers, the investment bank, fail; he was wrong. The plight of investors trapped by Lehman’s collapse — as an article in The Times put it, Lehman became “the Roach Motel of Wall Street: They checked in, but they can’t check out” — created panic in the financial markets, which has only grown worse as the days go by. Indicators of financial stress have soared to the equivalent of a 107-degree fever, and large parts of the financial system have simply shut down.

There’s growing evidence that the financial crunch is spreading to Main Street, with small businesses having trouble raising money and seeing their credit lines cut. And leading indicators for both employment and industrial production have turned sharply worse, suggesting that even before Lehman’s fall, the economy, which has been sagging since last year, was falling off a cliff.

How bad is it? Normally sober people are sounding apocalyptic. On Thursday, the bond trader and blogger John Jansen declared that current conditions are “the financial equivalent of the Reign of Terror during the French Revolution,” while Joel Prakken of Macroeconomic Advisers says that the economy seems to be on “the edge of the abyss.”

And the people who should be steering us away from that abyss are out to lunch.

What we have here is a financial panic.

It doesn't help when the nation's first idiot (Bush 43) goes on TV and tells the American public that we are facing financial apocalypse if the Congress doesn't pass the ransom note inadequate piece of legislative garbage his Treasury Secretary shoved through the congressional mail slot telling them "Give me the money or else!"

Note the sentence I highlighted in the editorial above. Bush is a fool advised by power-mad greedy idiots. The tactics for getting the Paulson Proposal have all the earmarks of the paranoid Dick Cheney ("Give me all the power and an ungodly amount of money immediately without asking any questions.") Of course, no one worked to bring the House Republicans in on the deal, so they balked (right before an election Bush/Paulson are going to SOCIALIZE Wall Street? When three weeks ago the administration was saying "The fundamentals of the economy are strong?"

All I can say is - This is the Reagan Revolution at work. The individuals who are occupying the leadership roles in America couldn't lead angry dogs into a dogfight, partly because they are too busy stealing money from the public purse to even be aware that America was drifting into trouble. Enron, the Iraq war and occupation, and Katrina should have warned everyone just how bad conservatives are at governing. And most of the media still doesn't get it.

The path to the current disaster has been clearly marked, but everyone who matters has simply ignored the signs. Now we have arrived at the clearly predictable result of unregulated and uncontrolled banking together with trickle-down economics.

Now we are all going to go through an extended bad patch, followed by a lot of work as the adults have to try to repair as much of the damage the conservative have created as possible.

And I told you so.

So the larded up Treasury plan is all we have right now. Will it work? Back to Krugman:

...the fact is that the plan on offer is a stinker — and inexcusably so. The financial system has been under severe stress for more than a year, and there should have been carefully thought-out contingency plans ready to roll out in case the markets melted down. Obviously, there weren’t: the Paulson plan was clearly drawn up in haste and confusion. And Treasury officials have yet to offer any clear explanation of how the plan is supposed to work, probably because they themselves have no idea what they’re doing. [Snip]

I hope the plan passes, because otherwise we’ll probably see even worse panic in the markets. But at best, the plan will buy some time to seek a real solution to the crisis.

And that raises the question: Do we have that time?

A solution to our economic woes will have to start with a much better-conceived rescue of the financial system — one that will almost surely involve the U.S. government taking partial, temporary ownership of that system, the way Sweden’s government did in the early 1990s. Yet it’s hard to imagine the Bush administration taking that step.

We also desperately need an economic stimulus plan to push back against the slump in spending and employment. And this time it had better be a serious plan that doesn’t rely on the magic of tax cuts, but instead spends money where it’s needed. (Aid to cash-strapped state and local governments, which are slashing spending at precisely the worst moment, is also a priority.) Yet it’s hard to imagine the Bush administration, in its final months, overseeing the creation of a new Works Progress Administration.

Even with this situation facing America and the world - Wall Street bankers are being advised to take numbers to line up for good "jumping" windows - two-thirds of the House Republicans still think the problem with the bail-out bill is that it requires too much regulation, threatens government takeover of failed banks and provides for too few tax cuts.

Guess what got us to this point? Conservatives in politics.That's what. And there are not enough of them in Congress or the administration together to provide the raw material for one thinking human being, but there are way too many to fit into an insane asylum.